S
l
a
t
e
r
&
G
o
r
d
o
n
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
SLATER & GORDON LIMITED
ANNUAL REPORT 2018
Contents
Slater & Gordon Limited Annual Report 2018
03 Chair’s Report04 Chief Executive Officer´s Report 06 People and Culture07 Social Responsibility08 Financial Statements09 Directors’ Report31 Auditor’s Independence Declaration32 Consolidated Statement of Profit or Loss and Other Comprehensive Income34 Consolidated Statement of Financial Position35 Consolidated Statement of Changes in Equity36 Consolidated Statement of Cash Flows37 Notes to the Financial Statements79 Slater and Gordon Limited Directors’ Declaration80 Independent Auditor’s Report87 Additional ASX Information89 Corporate Directory We have a shared purpose with our clients –
our success is their success.
Slater & Gordon Limited Annual Report 2018
01
We are incredibly passionate
about achieving the very best
outcomes for our clients, and
delivering affordable access to
justice for everyday Australians.
02
Slater & Gordon Limited Annual Report 2018 Chair’s Report
The Slater and Gordon FY18 financial results
reflect a year of significant change.
While the financial report shows a net profit after tax of
$113.7m (2017: $546.8m loss), this result was significantly
affected by the Company’s one-off gain on the disposal of its
UK business as part of its recapitalisation in December 2017.
The report also shows a net loss after tax on continuing
operations, $31.9m (2017: $74.5m loss), which reflects
costs associated with the Company’s divestments in parts
of its business as well as its mostly completed but ongoing
transformation program. As a result of this program, Slater
and Gordon now has a stronger capital structure, a simplified
operating model and a clearly defined service offering;
giving the stability required to now focus on growing its
core services.
The recapitalisation of the Company completed in December
2017 has provided a strong capital structure with a more
appropriate level of debt and increased liquidity. In addition,
all UK operations and UK subsidiaries were separated from
the Company, enabling both businesses to focus on their
strategic strengths and reduce significant overheads.
The Company’s major shareholder has a strong global
track record of restructuring businesses and nurturing their
turnaround. Without their support the more than 12,000
clients that Slater and Gordon helped last year would not
have benefited from the support and expertise that the
Company could provide. Our major shareholder believes
in the strength of Slater and Gordon’s brand and its people,
who are incredibly passionate about achieving the very best
outcomes for our clients, and understands the Company’s
success is built on this dedication to delivering for its clients.
experience across both the public and private sectors,
working with corporations, governments and unions.
In addition, they have considerable expertise in the
transformation and turnaround of businesses and years
of Board experience between them. I am proud to Chair
a Board so diverse and with such depth of experience.
The new Board also has a deep understanding of the labour
movement and the importance of delivering affordable access
to justice for everyday Australians. The labour movement
and its industrial arm is at the very core of the Company’s
foundations, and our staff, Board and shareholders are
deeply committed to it.
In the past twelve months, we have implemented a strong
program of initiatives that we believe will set us up for
long-term sustainability so we can continue to unlock
access to justice for the thousands of Australians who need
our help. This transformation to date would not have been
possible without the tireless efforts of the Slater and Gordon
family. I would like to thank the staff, leadership team
and Board for their passion, professionalism and resolute
commitment to our clients and the on-going success of the
business. In particular, I would like to thank our new CEO,
John Somerville, who has hit the ground running since he
commenced in February and has provided strong leadership
and a clear vision for the team.
I also want to thank our unions, regulators, industry bodies,
sponsorship partners and business partners for the support
they have given us as we have worked to stabilise the business.
Now, I am very pleased to say, we have in place good
strategy, good leadership and good governance.
A new Board has been appointed, with Merrick Howes,
Nils Stoesser, Hayden Stephens and myself appointed in
December and Elana Rubin and Jacqui Walters appointed
in March. The new Board brings to the table a wealth of
James MacKenzie
Chair
03
Slater & Gordon Limited Annual Report 2018 Chief Executive Officer´s Report
Slater and Gordon’s results reflect the work
we have undertaken, but also the challenges
we still face.
The financial report shows the Company ended the full year
to 30 June 2018 with:
• A total profit after tax of $113.7m (2017: $546.8m loss)
being largely comprised of a net profit after tax of
discontinued operations of $145.6m (2017: $472.4m loss),
whereas the net loss after tax of continuing operations was
$31.9m (2017: $74.5m loss). The significant net profit after
tax on discontinued operations was primarily due to the gain
on disposal of the Company’s UK operations which was
part of the recapitalisation completed in December 2017;
• Total revenue and other income from continuing
operations of $159.3m (2017: $181.5m), impacted
by the reduction in the size of the business;
• Operating cash outflows generated from continuing
operations of $8.0m (2017: $22.2m cash outflows); and
• A significantly improved net asset position of $63.3m
(2017: net liabilities of $248.8m) following restatement
of the senior secured debt facilities and separation from
the UK business.
FY18 has been a year of renewal for Slater and Gordon.
The recapitalisation, approved by shareholders in December
2017, delivered a stronger capital structure. We have
developed a business strategy that has seen inroads made into
restoring the viability and sustainability of the Company. It
has enabled us to invest in improving systems and processes,
including a significant upgrade to our IT systems, to deliver
an even better service for our clients. Furthermore, the
separation of the UK and the Australian businesses has
enabled us to focus our resources and efforts on stabilising
the Australian business.
A central part of this stabilisation has been a renewed
focus on Slater and Gordon’s core strengths. Following
an extensive review in late 2017 Slater and Gordon now has
a more streamlined, contemporary service offering. The
Company is focused on organically growing its core service
areas of Personal Injury, Union Services, Class Actions,
and Industrial and Employment Law; having retained a
smaller general litigation practice in Melbourne focused on
commercial and estate litigation. As part of the Company’s
strong commitment to the Australian trade union movement,
the Company has expanded its Union Services team and
offering to maintain a Criminal and Family Law service and
free wills for union clients.
A new Board and Executive Leadership Team, a focused
business strategy and a stronger capital structure means
Slater and Gordon can focus on doing what it does best –
helping everyday Australians secure a better future by being
trusted legal advocates for our clients. Our clients come to us
at what is often the most vulnerable period of their lives and
without us many of them would not be able to access justice.
Despite the challenges of the past few years our people have
continued to focus on and deliver consistently excellent
outcomes for our clients. I want to commend their tireless
dedication to and compassion for their clients. This absolute
focus on delivering the best results for our clients permeates
our Company and makes us fierce in our representation.
Our new advertising campaign, launched in February,
reinforces our strong connection with our clients and reflects
the important role Slater and Gordon plays in navigating a
complex legal system to get the best results for them. In it our
clients generously share their stories and their experiences
with Slater and Gordon as their trusted legal advocates. You
can view that campaign here https://youtu.be/-ZSfePDx3ic
Slater and Gordon’s long history of achievements are
formidable. It was built on hundreds of committed lawyers
and staff being innovative, determined, passionate and the
best in the legal profession. Despite the challenges of the
past few years, this has not changed. Our brand is strong,
we remain top of mind for people to call for expert legal
services and our client satisfaction results remain high.
Whilst we still have work to do, we have come a long way in
12 months. The fundamentals of the business are improving
and will continue to improve so we can continue to do what
we do best – unlocking access to justice for the thousands
of Australians who need our help.
John Somerville
Chief Executive Officer
04
Slater & Gordon Limited Annual Report 2018 05
Slater & Gordon Limited Annual Report 2018It is this absolute focus on delivering the best results for our clients that makes us fierce in our representation and permeates our firm. People and Culture
06
Slater & Gordon Limited Annual Report 2018Building Leadership StrengthA senior leadership transition took place over the course of the year with the appointment of a new Chief Executive Officer, along with a number of changes in Executive Leadership roles. Four of the eight Executive Leadership roles affected by the transition were filled internally, underscoring the high calibre of our internal talent. An additional four roles were recruited externally, demonstrating our ability to attract high calibre talent in the market.Focusing on our Core Strengths The Company announced in February that it had undertaken a review of its organisational structure to:• focus on our core legal practice areas of Personal Injury Law, Class Actions and Industrial and Employment Law, resulting in a downsizing of the general law business, by winding down or divesting the practice areas of Succession, Criminal Law and Family Law;• focus on commercial and estate litigation in a smaller general litigation practice in Melbourne;• expand Union Services to maintain a criminal and family law service offering and free wills for our union clients as part of our strong commitment to the Australian Trade Union movement; and• continue to focus on delivering the highest quality legal services to our clients.This work sees the Company return to its core strengths. Moving forward, Slater and Gordon now employs over 800 people in Victoria, ACT, NSW, Queensland and WA.The People StrategyThe focus of the Company’s People plan is to empower our people to achieve success for their clients and in their careers resulting in pride and optimism. People choose to work at Slater and Gordon to experience meaningful careers where they are recognised, rewarded and developed. The values of ‘Do it Right’, ‘Work well with Others’ and ‘Take the Lead’ are at the core of our People practices, so the ‘what’ and the ‘how’ of the ways of working are balanced.DiversitySlater and Gordon prides itself on the richness of our diversity. The Company is proud to have 33% female Board representation. Diversity is also strong in the management teams with women comprising 50% of our Executive Leadership team and 45% of senior managers.The people the Company employs are as diverse as our clients. They live and work in their community. In the work they undertake for their clients they provide support for people at a difficult time in their lives. In many cases access to justice is made easier for clients by speaking the native languages of clients including Vietnamese, Cantonese, Mandarin, Korean, Hindi, PNG Pidgin, Dari, Turkish, Arabic, Greek, Croatian, Italian, Russian, Ukrainian, Bosnian, Serbian, French, Macedonian, Spanish, Polish Swahili and Igbo (Nigerian). Social Responsibility
07
Slater & Gordon Limited Annual Report 2018Slater and Gordon is built on values of social justice and we are committed to giving back to our communities. Our social responsibility program has three key areas of focus: assisting people with disease and disability, addressing inequality and disadvantage and encouraging people to engage in healthy activity and lifestyles.One of the defining features of our Company is our relationship with the local communities in which we operate. We encourage and support that relationship through sponsorship activities, volunteering activities and pro bono legal support, as well as giving staff the opportunity to donate a portion of their wage to our Staff Giving Program, which goes towards funding local projects throughout Australia via the Slater and Gordon Community Fund.Slater and Gordon also gives back through its commitment to philanthropic activity, having established the Community Fund in 2001 and an Asbestos Research Fund in 2004.In 2014 the Company broadened its commitment to achieving outcomes for people suffering disease and disability by establishing the Health Projects and Research Fund.The Slater and Gordon Community FundOur Community Fund is a philanthropic fund which offers grants to community groups.Financial support is given to projects and initiatives which further the social responsibility program. The fund is supported by donations from Slater and Gordon staff via our Staff Giving Program as well as by the Company itself.Health Projects and Research Fund The Slater and Gordon Health Projects and Research Fund is a philanthropic grants initiative focused on improving care and treatment for people with asbestos related illnesses, occupation-caused cancers or significant disability caused by a catastrophic injury. The fund also provides small ongoing education grants to medical and health professionals, who are dedicated to the prevention, treatment, care and support of people who have an asbestos related disease, work-related cancer or a catastrophic spinal or brain injury.Pro Bono WorkSlater and Gordon has a proud history of providing pro bono and public interest legal work in Australia. Our lawyers undertake pro bono work in many areas of law and through that work have assisted members of the community, including people with severe disabilities, charities and community and indigenous groups, as well as volunteering at community legal centres.VolunteeringWe are proud to say that many of our staff actively participate in their local community and we support and encourage them by offering volunteering leave. Our volunteering policy allows staff to take up to two days per year volunteer leave. We recognise that some staff choose to volunteer outside their normal hours of work and we allow staff to access time in lieu entitlements. Financial Statements
09 Directors’ Report
31 Auditor’s Independence Declaration
32 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 30 June 2018
34 Consolidated Statement of Financial Position as at 30 June 2018
35 Consolidated Statement of Changes in Equity for the Year Ended 30 June 2018
36 Consolidated Statement of Cash Flows for the Year Ended 30 June 2018
37 Notes to the Financial Statements for the Year Ended 30 June 2018
79 Slater and Gordon Limited Directors’ Declaration
80 Independent Auditor’s Report
87 Additional ASX Information
89 Corporate Directory
08
08
Slater & Gordon Limited Annual Report 2018
Slater & Gordon Limited Annual Report 2018 Directors’ Report
The Directors present their report, together with the financial report of the consolidated entity consisting of Slater &
Gordon Limited (“the Company”) and its controlled entities (jointly referred to as “the Group”), for the financial year ended
30 June 2018 and the auditor’s report thereon. This financial report has been prepared in accordance with Australian
Accounting Standards. Compliance with Australian Accounting Standards ensures compliance with International
Financial Reporting Standards (“IFRS”).
Directors
The Directors in office at any time during the financial year and up to the date of this report are:
•
James MacKenzie – Chair (appointed 22 December 2017)
• Merrick Howes (appointed 22 December 2017)
• Elana Rubin (appointed 6 March 2018)
• Hayden Stephens (appointed 6 December 2017)
• Nils Stoesser (appointed 22 December 2017)
•
Jacqui Walters (appointed 6 March 2018)
• Tom Brown (ceased as Non-Executive Director 22 December 2017)
• Andrew Grech (ceased as Non-Executive Director 6 December 2017)
•
•
James M. Millar (ceased as Non-Executive Director 22 December 2017)
John Skippen (ceased as Chair and Non-Executive Director 22 December 2017)
Details of the skills, experience, expertise and special responsibilities of each Director are set out in the “Information on
Directors and Company Secretary” section of this report.
Principal Activities
The principal activity of the Group during the financial year until December 2017 was the operation of legal practices in
Australia and the United Kingdom (“UK”) providing legal services in two main areas of consumer law – Personal Injury
Law and General Law. From December 2017, the principal activity of the Group was the operations of legal practices in
Australia.
Review of Operations
The Slater and Gordon vision
The Company’s vision is to help everyday Australians secure a better future by being trusted legal advocates for clients
and by building strong relationships within the communities in which the Company operates.
The Company does not represent the big end of town. The Company helps unlock justice for everyday Australians who
it believes have a right of redress or compensation, where there is a considerable power imbalance. The Company’s
clients come to the Company at what is often the most vulnerable time of their lives. Without the Company’s services,
many of the Company’s clients would not be able to access justice.
The Company treats clients with compassion and respect and the Company prides itself on delivering the highest quality
legal services to them. This absolute focus on client results makes the Company fierce in its representation and
permeates the firm. The Company has a shared purpose with its clients – the Company’s success is dependent upon
their success.
The Company has a history of innovating and is active in protecting and enhancing the legal rights of clients. The
Company’s advocacy extends beyond individual cases to include the issues of social justice and individual rights more
broadly.
The Company’s diversity mirrors the diversity of its clients and its communities.
The Company has three core values:
+
Do it right – be passionate about the quality of the work and always achieve the highest professional standards
in order to exceed client’s expectations
+ Work well with others – share knowledge, experience and ideas. Encourage respect and collaboration within
the firm and the community
+
Take the lead – challenge ourselves to be the best, strive for innovation and be committed to doing everything
that can be done to help clients achieve their goals
Slater & Gordon Limited
09
Page 1
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Strategic pillars
• Stable foundations – a sustainable and profitable base
• Use and strengthen our brand
• Get governance right – balance risk and return
• Help our people be successful
•
• Grow existing services
• Grow new services consistent with brand and aspiration
Increase efficiency and productivity
Managing risks
The following details some of the material business risks that could affect the growth of the Company’s core services.
These are not listed in order of significance and do not comprise every risk that the Company may be exposed to.
Description of key risk
Key risk mitigation
Regulatory & Industry Reform
The Company’s operations are subject to extensive
regulation. Adverse regulatory or legislative changes
may adversely impact the Company’s operations,
financial performance and position.
Comprehensive stakeholder engagement, informed
discussion, government consultation to advocate our position,
modelling of the potential impact of changes and business
model and the optimisation of practice management service
offerings are initiatives we use to monitor, manage and protect
against potential legislative changes.
Operations
There are a number of key operational risks which arise
directly from the operations of the Company as a major
participant in the Australian legal services industry,
including strategic and business decisions, technology
and cyber risk, reputation risk, fraud, compliance with
legal and regulatory obligations, counterparty
performance under outsourcing and referral
arrangements, business continuity planning, legal risk,
data integrity risk, client default risk, key personnel risk
and external events.
The Company’s financial performance and position
have been, and in the future may continue to be,
impacted by these risks.
Competition and Market Share
The Company operates in a competitive market,
competing for its offering of personal injury and/or other
legal services. Competition is on the basis of a number
of factors, including the quality of advice and service,
innovation, reputation and price. The financial
performance may be adversely impacted as a result of
these risks.
People
The Company may be unable to attract, retain and
develop talented people which may limit its ability to
deliver its growth initiatives.
Capital Management
Following the recapitalisation, funding and management
of capital and liquidity remains a key focus. Additional
funds may need to be obtained through capital raisings
or cash flow may need to be managed through seeking
to negotiate current debt arrangements.
The Company has business performance improvement
programs in place designed to standardise, centralise,
optimise and promote efficient and innovative operating
platforms, IT systems and people strategies.
Monitoring of competitive markets to understand competitive
activities and the ongoing demand for our services and
continued expansion of business development initiatives.
People, culture and remuneration initiatives are being
undertaken to further support and engage our people.
Close involvement of the Company’s lenders to ensure liquidity
needs are monitored closely and arrangements are put in
place where necessary to bridge short term liquidity needs.
Refer to the Company’s Corporate Governance Statement for details of the Company’s risk management framework.
10
Slater & Gordon Limited
Page 2
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Strategic pillars
• Stable foundations – a sustainable and profitable base
• Use and strengthen our brand
• Get governance right – balance risk and return
• Help our people be successful
•
Increase efficiency and productivity
• Grow existing services
• Grow new services consistent with brand and aspiration
Managing risks
The following details some of the material business risks that could affect the growth of the Company’s core services.
These are not listed in order of significance and do not comprise every risk that the Company may be exposed to.
Description of key risk
Key risk mitigation
Regulatory & Industry Reform
The Company’s operations are subject to extensive
Comprehensive stakeholder engagement, informed
regulation. Adverse regulatory or legislative changes
discussion, government consultation to advocate our position,
may adversely impact the Company’s operations,
modelling of the potential impact of changes and business
financial performance and position.
model and the optimisation of practice management service
offerings are initiatives we use to monitor, manage and protect
against potential legislative changes.
The Company has business performance improvement
programs in place designed to standardise, centralise,
optimise and promote efficient and innovative operating
platforms, IT systems and people strategies.
Operations
There are a number of key operational risks which arise
directly from the operations of the Company as a major
participant in the Australian legal services industry,
including strategic and business decisions, technology
and cyber risk, reputation risk, fraud, compliance with
legal and regulatory obligations, counterparty
performance under outsourcing and referral
arrangements, business continuity planning, legal risk,
data integrity risk, client default risk, key personnel risk
and external events.
The Company’s financial performance and position
have been, and in the future may continue to be,
impacted by these risks.
Competition and Market Share
The Company operates in a competitive market,
Monitoring of competitive markets to understand competitive
competing for its offering of personal injury and/or other
activities and the ongoing demand for our services and
legal services. Competition is on the basis of a number
continued expansion of business development initiatives.
of factors, including the quality of advice and service,
innovation, reputation and price. The financial
performance may be adversely impacted as a result of
The Company may be unable to attract, retain and
People, culture and remuneration initiatives are being
develop talented people which may limit its ability to
undertaken to further support and engage our people.
these risks.
People
deliver its growth initiatives.
Capital Management
Following the recapitalisation, funding and management
Close involvement of the Company’s lenders to ensure liquidity
of capital and liquidity remains a key focus. Additional
needs are monitored closely and arrangements are put in
funds may need to be obtained through capital raisings
place where necessary to bridge short term liquidity needs.
or cash flow may need to be managed through seeking
to negotiate current debt arrangements.
Refer to the Company’s Corporate Governance Statement for details of the Company’s risk management framework.
Directors’ Report
Financial review
The Group reported a net loss before tax from continuing operations of $29,238,000 for the year ended 30 June 2018, an
improvement of 70% from the prior year. The improvement was substantially driven by cost reductions in employee and
rental costs, consistent with the strategy to review the business footprint. The prior year also included significant non-
recurring expenses, particularly consultant fees (FY18 $7,103,000: FY17 $17,669,000) and an impairment charge of
$10,959,000.
The Group permanently reduced its outstanding secured debt under the Recapitalisation (refer below). As at 30 June
2018, the Group’s total borrowings were $155,119,000. The Group has a positive net current asset balance of
$122,398,000 and positive overall net asset balance of $63,295,000.
Significant Changes in the State of Affairs
On 6 December 2017, Andrew Grech resigned as a Director and Hayden Stephens was appointed as a Director. On 22
December 2017, the Company completed a major restructure with the approval and implementation of two schemes of
arrangements.
The Senior Lender Scheme of Arrangement resulted in:
• A reduction of $636.6 million in secured debt owed by the Company and its Australian subsidiaries;
• Separation of the UK operations and UK subsidiaries from the Group and transfer of those entities to an entity wholly
owned by the Company’s senior lenders; and
• The issuance of 66,050,874 ordinary shares in the Company to the senior lenders, representing 95% of the
Company’s total issued capital.
The Shareholder Claimant Scheme of Arrangement resulted in the compromise and settlement of all shareholder claims
against the Company arising out of the matters which were the subject of a number of shareholder class actions. All
class actions were settled by the establishment of a settlement fund with KordaMentha appointed administrator of the
fund from which shareholders claims are to be paid.
The Senior Lender Scheme of Arrangement has been implemented and is now complete. The Shareholder Claimant
Scheme of Arrangement remains on foot until the settlement fund has been paid out in full.
Further, following implementation of the Senior Lender Scheme of Arrangement in December 2017, a number of
changes to the Company’s Board took effect, with Merrick Howes, James MacKenzie and Nils Stoesser appointed to the
Board and Tom Brown, James Millar and John Skippen resigned.
In March 2018, Elana Rubin and Jacqui Walters were appointed to the Board.
Events Subsequent to Reporting Date
The Directors are not aware of any significant events since the end of the reporting period.
Likely Developments
The Group is now focused on organically growing its core service areas of Personal Injury Law, Union Services, Class
Actions, Industrial and Employment Law and Commercial and Estate Litigation in Australia.
Environmental Regulation
The Group’s operations are not subject to any significant environmental regulations or laws in Australia.
Environmental, Social and Corporate Governance
Pursuant to ASX Corporate Governance Principle and Recommendation 7.4, which provides that companies disclose
any material exposure to economic, environmental or social sustainability risks, the Company does not consider that the
operations are materially exposed to environmental or social sustainability risk.
Dividends Paid, Recommended and Declared
The Group has not declared or paid any dividends in respect of the 30 June 2018 financial year.
The dividends paid and declared since the start of the financial year are as follows:
Slater & Gordon Limited
Page 2
Slater & Gordon Limited
Dividends on ordinary shares
No interim dividend paid in 2018 (2017: No interim dividend paid)
No final dividend for 2017 (2016: No final dividend paid)
2018
$’000
-
-
-
2017
$’000
-
-
-
11
Page 3
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Share Options
No options over unissued shares or interests in the Company were granted during or since the end of the financial year.
There were no options outstanding at the end of the financial year.
Indemnification and Insurance of Directors and Officers and Auditors
During the financial year, the Group has provided an indemnity or entered an agreement to indemnify, and paid
insurance premiums for a twelve-month period in respect of Directors, Officers and the Company Secretary of the
Company against a liability brought against such an Officer.
Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the
contract.
The Group has agreed (in certain circumstances) to indemnify its auditors, Ernst & Young, as part of the terms of its audit
engagement agreement. No payment has been made to indemnify Ernst & Young during or since the financial year.
Information on Directors and Company Secretary
The skills, experience, expertise and special responsibilities of each person who has been a Director of the Company at
any time during or since the end of the financial year is provided below, together with details of the Company Secretary
as at the year end.
James MacKenzie
B.Bus, FCA, FAICD
Chair
Independent Non-Executive
Director
Appointed 22 December
2017
Experience
James is the Chair of Slater and Gordon, having joined the organisation in December
2017.
James MacKenzie is an experienced Australian company director. He currently serves as
President of the Victorian Arts Centre Trust and Chairman of Victorian Funds Management
Corporation and Development Victoria.
James was previously Chair of the Transport Accident Commission (TAC) and Worksafe
Victoria, Managing Director of Funds Management and Insurance at the ANZ Banking
Group, Chief Executive Officer of Norwich Union Australia, and TAC Chief Executive
Officer. He has been a member of the COAG Business Advisory Forum and a previous
director of VFMC.
James has a Bachelor of Business from Swinburne University, and is a Fellow of the
Australian Institute of Company Directors and the Institute of Chartered Accountants in
Australia.
In 2001, he was awarded the Centenary Medal for services to Public Administration.
James is Chair of the Board and is also a member of the Audit and Risk Committee and
the People and Culture Committee.
Other directorships of listed companies held in the last three years
Melco Crown Entertainment Limited (NASDAQ:MPEL)(2008 to 2016)
Merrick Howes
BA LLB
Non-Independent Non-
Executive Director
Appointed 22 December
2017
Experience
Merrick joined Anchorage Capital Group in Sydney in November 2011. Prior to joining
Anchorage, he worked at Aviron Capital, a firm based in Sydney, Australia. Prior to Aviron,
Merrick was the Co-founder and Managing Director at Shearwater Capital, where he focused
on special situations and distressed debt investments. Prior to Shearwater, he was a Partner
and Managing Director in the Principal Investment Area at Goldman Sachs in Australia.
Merrick was also a Managing Director and European Head of Global Structured Products at
Merrill Lynch in Hong Kong and London. He also worked at Macquarie Bank Limited from
1989 to 1998. Merrick received a BA in Accounting and a Bachelor of Laws from the
Australian National University.
Other directorships of listed companies held in the last three years
None
12
Slater & Gordon Limited
Page 4
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Share Options
No options over unissued shares or interests in the Company were granted during or since the end of the financial year.
There were no options outstanding at the end of the financial year.
Indemnification and Insurance of Directors and Officers and Auditors
During the financial year, the Group has provided an indemnity or entered an agreement to indemnify, and paid
insurance premiums for a twelve-month period in respect of Directors, Officers and the Company Secretary of the
Company against a liability brought against such an Officer.
Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the
contract.
The Group has agreed (in certain circumstances) to indemnify its auditors, Ernst & Young, as part of the terms of its audit
engagement agreement. No payment has been made to indemnify Ernst & Young during or since the financial year.
Information on Directors and Company Secretary
The skills, experience, expertise and special responsibilities of each person who has been a Director of the Company at
any time during or since the end of the financial year is provided below, together with details of the Company Secretary
as at the year end.
James MacKenzie
B.Bus, FCA, FAICD
Chair
Director
2017
James is the Chair of Slater and Gordon, having joined the organisation in December
Experience
2017.
Independent Non-Executive
James MacKenzie is an experienced Australian company director. He currently serves as
President of the Victorian Arts Centre Trust and Chairman of Victorian Funds Management
Appointed 22 December
Corporation and Development Victoria.
James was previously Chair of the Transport Accident Commission (TAC) and Worksafe
Victoria, Managing Director of Funds Management and Insurance at the ANZ Banking
Group, Chief Executive Officer of Norwich Union Australia, and TAC Chief Executive
Officer. He has been a member of the COAG Business Advisory Forum and a previous
director of VFMC.
Australia.
James has a Bachelor of Business from Swinburne University, and is a Fellow of the
Australian Institute of Company Directors and the Institute of Chartered Accountants in
In 2001, he was awarded the Centenary Medal for services to Public Administration.
James is Chair of the Board and is also a member of the Audit and Risk Committee and
the People and Culture Committee.
Other directorships of listed companies held in the last three years
Melco Crown Entertainment Limited (NASDAQ:MPEL)(2008 to 2016)
Merrick Howes
Experience
BA LLB
Merrick joined Anchorage Capital Group in Sydney in November 2011. Prior to joining
Non-Independent Non-
Anchorage, he worked at Aviron Capital, a firm based in Sydney, Australia. Prior to Aviron,
Executive Director
Appointed 22 December
2017
Merrick was the Co-founder and Managing Director at Shearwater Capital, where he focused
on special situations and distressed debt investments. Prior to Shearwater, he was a Partner
and Managing Director in the Principal Investment Area at Goldman Sachs in Australia.
Merrick was also a Managing Director and European Head of Global Structured Products at
Merrill Lynch in Hong Kong and London. He also worked at Macquarie Bank Limited from
1989 to 1998. Merrick received a BA in Accounting and a Bachelor of Laws from the
Australian National University.
Other directorships of listed companies held in the last three years
None
Directors’ Report
Information on Directors and Company Secretary (continued)
Elana Rubin
BA(Hons) MA FFin FAICD
FIML
Independent Non-Executive
Director
Appointed 6 March 2018
Experience
Elana has over 20 years’ experience as a non-executive company director, across diverse
sectors. She is currently a Director of Mirvac and AfterPay Touch Group, as well as a
number of unlisted companies and government boards.
Elana was previously the Chair of AustralianSuper and WorkSafe Victoria, and a Director of
TAC (Vic). Other previous board roles covered the financial services, insurance,
infrastructure, professional services, and not-for-profit sectors.
Before becoming a full time non-executive director, Elana worked for one of the (then)
largest industry funds and the ACTU. She is a member of Chief Executive Women and
Women Corporate Directors International. Her career reflects an understanding of
corporate social licence to operate and a deep commitment to culture, diversity, social
equity and participation.
Elana is a member of the Audit and Risk Committee and the People and Culture
Committee.
Other directorships of listed companies held in the last three years
Mirvac Limited (ASX:MGR)(2010 to current)
Afterpay Touch Group Limited (ASX:APT)( 2017 to current)
Touchcorp Limited (ASX: TCH)(2015 to 2017)
Hayden Stephens
BA LLB
Non-Independent Non-
Executive Director
Appointed 6 December
2017
Experience
Hayden is a Non-Executive Director at Slater and Gordon.
Previously, Hayden was Chief Executive Officer, Australia and prior to that held executive
leadership positions across group, service and geographic business units.
Hayden started at Slater and Gordon in 1993 in Melbourne. In the decade that followed,
Hayden specialised in personal injury law and was involved in a number of ground breaking
legal cases. His work included acting for persons in public and product liability law, assisting
asbestos disease sufferers and acting for victims of child sex abuse in clergy institutions.
In late 1999, Hayden was appointed leader of the firm’s operations in Western Australia and
remained in this role until 2004.
Between 2004 - 2009, Hayden held leadership positions in the firm’s National Workers'
Compensation practice group. Among his achievements in this role, Hayden worked
proactively with stakeholders to help shape legislative reform of Victorian personal injuries
compensation. Hayden has since continued his work with key stakeholders, State and
Federal Government and Regulatory bodies.
Other directorships of listed companies held in the last three years
None
Nils Stoesser
MEng, ACA
Non-Independent Non-
Executive Director
Appointed 22 December
2017
Experience
Nils joined Anchorage Capital Group in May 2016 as a member of the Portfolio Group. As
part of the Portfolio Group, Nils is responsible for performing operational due diligence on
potential investments, and enhancing Anchorage’s ability to drive operational and
strategic change in companies where Anchorage has a position of influence. Before
joining Anchorage, he was Vice Chairman of the Supervisory Board and Advisor to the
CEO and Board of Management at Fokker Technologies Group. Prior to his time at
Fokker, Nils was a founding partner of Arle Capital Partners, the successor firm to
Candover Partners Limited, where he was a Director. Nils started his career at Arthur
Andersen. Nils received a Master’s in Mechanical Engineering from the University of
Newcastle upon Tyne and is a member of the Institute of Chartered Accountants in
England and Wales (ICAEW).
Nils is Chair of the People and Culture Committee.
Other directorships of listed companies held in the last three years
None
Slater & Gordon Limited
Page 4
Slater & Gordon Limited
13
Page 5
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Information on Directors and Company Secretary (continued)
Jacqui Walters
BCom (Accounting and
Finance) GAICD
Independent Non-Executive
Director
Appointed 6 March 2018
Experience
Jacqui joined the Slater & Gordon Board in March 2018. Jacqui has over 25 years’
experience in delivering and leading strategy and change projects in both the public and
private sector. She has international experience across many industry sectors. Her work
has ranged from whole of organisation transformation and restructuring to highly specific
areas such as major capital project delivery, new product introduction, professional
services strategy and performance, and post-merger culture alignment.
An experienced professional services leader with over 20 years’ experience working for
top tier management consulting firms, she has established a number of new practices,
and held leadership roles focussed on professional services growth strategies and
business performance, including merger and acquisition activities. The common theme
across Jacqui’s broad experience is the desire to solve complex problems, create real
value for her clients and build and lead powerful teams.
Jacqui is a founding partner of Era Innovation, a boutique advisory firm working with large
corporates to identify, select and commercialise growth opportunities.
Jacqui is a Board Member and Chair of the Risk and Audit Committee for Building
Queensland and established and Chairs the Citytrain Response Unit (oversighting the
transformation of Queensland Rail and public transport in Queensland).
Jacqui is Chair of the Audit and Risk Committee
Other directorships of listed companies held in the last three years
None
Tom Brown
MA
Experience
Tom Brown was a Non-Executive Director from September 2016.
Independent Non-Executive
Director
Tom Brown is one of Australia’s most senior HR Directors with more than 20 years’ Board
level experience across multiple industrial sectors.
Ceased 22 December 2017
Tom has held senior executive positions in global listed companies including Mobil, BHP
Billiton, Allied Domecq, Brambles and Rolls Royce in Europe, Africa, the USA and
Australia including Board level experience across multiple industrial sectors including Oil
and Gas, Mining, FMCG, Industrial Services, Utilities, Aeronautical and Marine.
Tom has led transformation programs in both high growth and turnaround environments.
Other directorships of listed companies held in the last three years
Gooroo Ventures Ltd (ASX:GOO)(2017 to current)
Andrew Grech
LLB MAICD
Non-Independent Non-
Executive Director
Ceased 6 December 2017
Experience
Andrew joined Slater and Gordon in 1994 and was appointed Managing Director in 2000.
Before being appointed Managing Director, Andrew worked in most of Slater and Gordon’s
litigation practice areas, across both high-profile class actions and individual compensation
claims. Andrew brought to the Board extensive experience as a legal practitioner and law
firm manager. Andrew was a Non-Executive Director from 29 June 2017 upon ceasing as
Group Managing Director.
Other directorships of listed companies held in the last three years
None
14
Slater & Gordon Limited
Page 6
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Directors’ Report
Information on Directors and Company Secretary (continued)
Information on Directors and Company Secretary (continued)
Jacqui Walters
Experience
James M. Millar AM
Experience
BCom (Accounting and
Jacqui joined the Slater & Gordon Board in March 2018. Jacqui has over 25 years’
Finance) GAICD
Independent Non-Executive
Director
experience in delivering and leading strategy and change projects in both the public and
private sector. She has international experience across many industry sectors. Her work
has ranged from whole of organisation transformation and restructuring to highly specific
areas such as major capital project delivery, new product introduction, professional
Appointed 6 March 2018
services strategy and performance, and post-merger culture alignment.
BCom FCA FAICD
James was appointed a Director of the Company in December 2015.
Independent Non-Executive
Director
Ceased 22 December 2017
James is a former Chief Executive Officer and Oceania Area Managing Partner of Ernst &
Young (now EY) and was a member of the Ernst & Young Global Board. His career prior
to the leadership roles at Ernst & Young was as a corporate reconstruction professional.
In 2012 James was appointed a Member in the General Division of the Order of Australia
for service to Business & Commerce and for Community Leadership.
Other directorships of listed companies held in the last three years
Fairfax Media Limited (ASX:FXJ)(2012 to current)
Non-Director – Macquarie Media Ltd (ASX:MRN)(2015 to current)
Non-Executive Director – Mirvac Limited (ASX:MGR)(2009 to current)
Non-Executive Director – Helloworld Travel Limited (ASX:HLO)(2010 to 2016)
John Skippen
ACA
Chair
Independent Non-Executive
Director
Ceased 22 December 2017
Experience
John was a Board member from 2010 and Chair of the Board from 2012.
John has over 30 years’ experience as a chartered accountant and was the former
Executive Finance Director of Harvey Norman Holdings Ltd. John brought to the Board
extensive financial, public company and retail experience and skills in financial
management, general management, mergers and acquisitions and strategy.
Other directorships of listed companies held in the last three years
Flexigroup Limited (ASX: FXL) (2006 to current)
Super Retail Group Ltd (ASX: SUL) (2008 to 2016)
Company Secretary
Michael Neilson
BA LLB GAICD FGIA
General Counsel and
Company Secretary
Appointed 20 April 2018
Experience
Michael is General Counsel and Company Secretary, having commenced in April 2018.
Prior to joining Slater and Gordon, Michael was at Crown Resorts Limited (ASX:CWN),
where he was Group General Counsel and Company Secretary for almost ten years and,
prior to that, he was General Counsel for Crown Melbourne.
From 1997 to 2004, Michael was at the Lend Lease Group where he was General Counsel
and Company Secretary of General Property Trust (ASX:GPT) (which was then managed
by Lend Lease) and prior to that General Counsel of Lend Lease Property Management.
Michael started his career in the commercial practice at Herbert Geer & Rundle where he
spent ten years before moving in house.
Michael has a strong track record in implementing governance, legal and regulatory
frameworks in complex, multinational businesses as well as deep experience managing
risk and compliance in challenging environments. Michael is Chair of the Council of
Camberwell Grammar School.
An experienced professional services leader with over 20 years’ experience working for
top tier management consulting firms, she has established a number of new practices,
and held leadership roles focussed on professional services growth strategies and
business performance, including merger and acquisition activities. The common theme
across Jacqui’s broad experience is the desire to solve complex problems, create real
value for her clients and build and lead powerful teams.
Jacqui is a founding partner of Era Innovation, a boutique advisory firm working with large
corporates to identify, select and commercialise growth opportunities.
Jacqui is a Board Member and Chair of the Risk and Audit Committee for Building
Queensland and established and Chairs the Citytrain Response Unit (oversighting the
transformation of Queensland Rail and public transport in Queensland).
Jacqui is Chair of the Audit and Risk Committee
Other directorships of listed companies held in the last three years
None
Experience
Tom Brown
MA
Director
Tom Brown was a Non-Executive Director from September 2016.
Independent Non-Executive
Tom Brown is one of Australia’s most senior HR Directors with more than 20 years’ Board
level experience across multiple industrial sectors.
Ceased 22 December 2017
Tom has held senior executive positions in global listed companies including Mobil, BHP
Billiton, Allied Domecq, Brambles and Rolls Royce in Europe, Africa, the USA and
Australia including Board level experience across multiple industrial sectors including Oil
and Gas, Mining, FMCG, Industrial Services, Utilities, Aeronautical and Marine.
Tom has led transformation programs in both high growth and turnaround environments.
Other directorships of listed companies held in the last three years
Gooroo Ventures Ltd (ASX:GOO)(2017 to current)
Experience
Andrew Grech
LLB MAICD
Non-Independent Non-
Executive Director
Ceased 6 December 2017
Andrew joined Slater and Gordon in 1994 and was appointed Managing Director in 2000.
Before being appointed Managing Director, Andrew worked in most of Slater and Gordon’s
litigation practice areas, across both high-profile class actions and individual compensation
claims. Andrew brought to the Board extensive experience as a legal practitioner and law
firm manager. Andrew was a Non-Executive Director from 29 June 2017 upon ceasing as
Group Managing Director.
None
Other directorships of listed companies held in the last three years
Slater & Gordon Limited
Page 6
Slater & Gordon Limited
15
Page 7
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Directors’ Meetings
The number of meetings of the Board of Directors and of each Board committee held during the financial year and the
number of meetings attended by each Director were:
Board of Directors
Audit and Risk Committee
People and Culture Committee
Eligible to
attend
Attended
Eligible to
attend
Attended
Eligible to
attend
Attended
J MacKenzie6
M Howes3
E Rubin4
H Stephens8
N Stoesser7
J Walters5
J Skippen1
T Brown1
A Grech2
J Millar1
8
8
5
8
8
5
11
11
10
11
8
8
5
8
7
5
11
10
10
11
2
2
-
-
-
2
-
-
-
-
2
1
-
-
-
2
-
-
-
-
2
-
2
-
2
-
-
-
-
-
2
-
2
-
2
-
-
-
-
-
1 Ceased as Director on 22 December 2017
2 Ceased as Director on 6 December 2017
3 Commenced as Director on 22 December 2017, ceased as a member of the Audit and Risk Committee on 20 June 2018
4 Commenced as Director on 6 March 2018
5 Commenced as Director on 6 March 2018
6 Commenced as Director on 22 December 2017
7 Commenced as Director on 22 December 2017
8 Commenced as Director on 6 December 2017
Directors’ Interests in Shares
Directors’ relevant interests in shares of the Company as at the date of this report are detailed below.
Ordinary Shares of the Company
Performance Rights
J MacKenzie
M Howes
H Stephens
N Stoesser
E Rubin
J Walters
J Skippen
T Brown
A Grech
J Millar
-
-
12,526
-
-
-
1,000
-
66,307
-
-
-
-
-
-
-
-
-
-
-
Directors’ Interest in Contracts
Directors’ interests in contracts are disclosed in Note 6.1 to the financial statements.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation
to the audit for the financial year is provided with this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
16
Slater & Gordon Limited
Page 8
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Non-Audit Services
Written approval for non-audit services is provided by resolution of the Audit and Risk Committee and approval is notified
to the Board of Directors. There were no non-audit services provided by the auditors of the Group during the year. The
Directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each
type of non-audit service provided means that auditor independence was not compromised.
Rounding of Amounts
The amounts contained in the Directors’ Report and Financial Report have been rounded to the nearest thousand dollars
(where rounding is applicable) under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191.The Company is an entity to which the Class Order applies.
The Directors’ Report and accompanying Audited Remuneration Report is signed in accordance with a resolution of the
Directors.
3 Commenced as Director on 22 December 2017, ceased as a member of the Audit and Risk Committee on 20 June 2018
James MacKenzie
Chair
Melbourne
29 August 2018
Directors’ relevant interests in shares of the Company as at the date of this report are detailed below.
Ordinary Shares of the Company
Performance Rights
The number of meetings of the Board of Directors and of each Board committee held during the financial year and the
number of meetings attended by each Director were:
Board of Directors
Audit and Risk Committee
People and Culture Committee
Eligible to
attend
Eligible to
attend
Attended
Attended
Attended
Eligible to
attend
2
2
2
-
-
-
-
-
-
-
2
2
2
-
-
-
-
-
-
-
2
2
2
-
-
-
-
-
-
-
Directors’ Report
Directors’ Meetings
J MacKenzie6
M Howes3
E Rubin4
H Stephens8
N Stoesser7
J Walters5
J Skippen1
T Brown1
A Grech2
J Millar1
8
8
5
8
8
5
11
11
10
11
8
8
5
8
7
5
11
10
10
11
1 Ceased as Director on 22 December 2017
2 Ceased as Director on 6 December 2017
4 Commenced as Director on 6 March 2018
5 Commenced as Director on 6 March 2018
6 Commenced as Director on 22 December 2017
7 Commenced as Director on 22 December 2017
8 Commenced as Director on 6 December 2017
Directors’ Interests in Shares
J MacKenzie
M Howes
H Stephens
N Stoesser
E Rubin
J Walters
J Skippen
T Brown
A Grech
J Millar
-
-
-
-
-
-
-
12,526
1,000
66,307
2
1
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Directors’ Interest in Contracts
Directors’ interests in contracts are disclosed in Note 6.1 to the financial statements.
Auditor’s Independence Declaration
to the audit for the financial year is provided with this report.
Proceedings on behalf of the Company
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Slater & Gordon Limited
Page 8
Slater & Gordon Limited
17
Page 9
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report
1.0 Introduction
FY18 has been a year of renewal for Slater and Gordon. The results show progress has been made, however this year
the Company did not meet its financial targets. As a result, Non-Executive Directors (NEDs) and Executive KMP did not
receive remuneration increases or Short Term Incentive Plan payments. Despite the challenges of the past year, the
Board, management and employees remain committed, optimistic and focused on the long term sustainable success of
the Company.
The new Board and management reviewed and will continue to review the remuneration structure to ensure it closely
aligns the interests of management with those of our clients, employees and shareholders, while also allowing Slater and
Gordon to attract and retain key people who are central to business stability and success.
Changes to Remuneration
During FY18 the Company made changes to the Short Term Incentive Plan. Gateways were introduced to baseline
performance and behaviours for participants. The change provides stronger linkages between individual and company
performance and reward outcomes.
Long Term Incentives (“LTI”) were not offered in FY18. The Company is currently designing a new Long Term Incentive
Plan to further provide a direct link between the interests of the participants, shareholders and the long-term success of
the Company. Further information on the proposed plan will be provided in the FY19 Remuneration Report.
Changes to Remuneration Report
The Company continues its commitment to providing transparency to employees, clients and shareholders on how NEDs
and Executive KMP are remunerated. The Company has made changes to the FY18 Remuneration Report to simplify
and improve the overall format and flow of information.
18
Slater & Gordon Limited
Page 10
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report
1.0 Introduction
FY18 has been a year of renewal for Slater and Gordon. The results show progress has been made, however this year
the Company did not meet its financial targets. As a result, Non-Executive Directors (NEDs) and Executive KMP did not
receive remuneration increases or Short Term Incentive Plan payments. Despite the challenges of the past year, the
Board, management and employees remain committed, optimistic and focused on the long term sustainable success of
the Company.
The new Board and management reviewed and will continue to review the remuneration structure to ensure it closely
aligns the interests of management with those of our clients, employees and shareholders, while also allowing Slater and
Gordon to attract and retain key people who are central to business stability and success.
Changes to Remuneration
During FY18 the Company made changes to the Short Term Incentive Plan. Gateways were introduced to baseline
performance and behaviours for participants. The change provides stronger linkages between individual and company
performance and reward outcomes.
Long Term Incentives (“LTI”) were not offered in FY18. The Company is currently designing a new Long Term Incentive
Plan to further provide a direct link between the interests of the participants, shareholders and the long-term success of
the Company. Further information on the proposed plan will be provided in the FY19 Remuneration Report.
Changes to Remuneration Report
The Company continues its commitment to providing transparency to employees, clients and shareholders on how NEDs
and Executive KMP are remunerated. The Company has made changes to the FY18 Remuneration Report to simplify
and improve the overall format and flow of information.
Directors’ Report
Audited Remuneration Report (continued)
2.0 Remuneration Report Overview
The Directors present the Remuneration Report (the Report) for the Company and its controlled entities for FY18.
This Report forms part of the Directors' Report and has been audited in accordance with section 300A of the
Corporations Act 2001. The Report details the remuneration arrangements for Slater and Gordon’s Key Management
Personnel (KMP):
•
•
Non-Executive Directors (NEDs)
Executive KMP
KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling
the major activities of the Company. The table below outlines the KMP and their movements during FY18:
Name
Title
Non-Executive Directors
James MacKenzie
• Chair of the Board
• Non-Executive Director
Merrick Howes
• Non-Executive Director
Elana Rubin
• Non-Executive Director
Hayden Stephens
• Non-Executive Director
Nils Stoesser
• Non-Executive Director
Jacqui Walters
• Non-Executive Director
John Skippen
• Chair of the Board
Tom (Thomas) Brown
• Non-Executive Director
Andrew Grech
• Non-Executive Director
James M. Millar
• Non-Executive Director
Other Executive KMP
John Somerville
• Chief Executive Officer
Belinda Nucifora
• Chief Financial Officer
Ken Fowlie
• Chief Executive Officer, UK
Bryce Houghton
• Group Chief Financial Officer
Change during FY18
Became Chair and Non-Executive Director on
22 December 2017
Became a Non-Executive Director on 22
December 2017
Became a Non-Executive Director on 6 March
2018
Became Director on 6 December 2017
Ceased as Chief Executive Office on 7
February 2018
Commenced as Non-Executive Director on
same date
Became a Non-Executive Director on 22
December 2017
Became a Non-Executive Director on 6 March
2018
Ceased as Chair and Non-Executive Director
on 22 December 2017
Ceased as a Non-Executive Director on 22
December 2017
Ceased as a Non-Executive Director on 6
December 2017
Ceased as a Non-Executive Director on 22
December 2017
Became Chief Executive Officer on 7 February
2018
Became Chief Financial Officer on 2 October
2017
Ceased as an employee of the Company on 15
December 2017
Ceased as Group Chief Financial Officer on 31
August 2017
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Slater & Gordon Limited
Page 10
Slater & Gordon Limited
19
Page 11
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
3.0 How remuneration is governed
The People and Culture Committee (formerly known as the Remuneration Committee) assists the Board to oversee the
establishment and operation of appropriate policies and strategies that provide the Company with the capability to
achieve its short and long-term business objectives, including recommending remuneration changes to the Board for
NEDs and Executive KMP.
3.1
Use of remuneration advisors
During FY18, the Company did not use remuneration advisors as defined under the Corporations Act 2001.
3.2
Clawback of remuneration
The clawback policy was introduced in June 2016. This policy enables Slater and Gordon to claw back certain elements
of an Executive KMP’s remuneration if there has been a misstatement of the financial statements that resulted in the
Executive KMP receiving a reward which exceeds the outcome which would have been achieved had the misstatement
not been made. The clawback provisions are designed to further align the interests of the Executive KMP with the long-
term interests of the Company and to ensure excessive risk-taking is not rewarded.
3.3
Share Trading Policy
The Company’s Share Trading Policy (the “Policy”) applies to all Directors, officers, employees, contractors and
consultants of Slater and Gordon. The Share Trading Policy outlines how and when Directors, officers, employees,
contractors and consultants may deal in Slater and Gordon securities.
If a Director or Executive KMP acquires securities in the Company, they should not sell or agree to sell any Slater and
Gordon securities of that class for at least 30 days.
Directors are prohibited from entering margin loans under the Company’s Share Trading Policy. Relevant Persons (as
defined in the Policy) require prior approval to enter into a margin loan arrangement where the amount of shares
mortgaged, provided as security, lent or charged to a financier, amounts to 1% or more of the issued capital in the
Company at the relevant time. A Relevant Person must notify the Company Secretary immediately if they are given
notice by their financier of an intention to make a margin call and sell the Company’s securities during a prohibited
trading period.
Relevant Persons must not enter into hedging arrangements in relation to securities in the Company that are unvested or
subject to disposal restrictions or minimum shareholding requirements.
The Company’s Share Trading Policy is available on the Slater and Gordon website www.slatergordon.com.au.
20
Slater & Gordon Limited
Page 12
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
3.0 How remuneration is governed
The People and Culture Committee (formerly known as the Remuneration Committee) assists the Board to oversee the
establishment and operation of appropriate policies and strategies that provide the Company with the capability to
achieve its short and long-term business objectives, including recommending remuneration changes to the Board for
NEDs and Executive KMP.
3.1
Use of remuneration advisors
3.2
Clawback of remuneration
During FY18, the Company did not use remuneration advisors as defined under the Corporations Act 2001.
The clawback policy was introduced in June 2016. This policy enables Slater and Gordon to claw back certain elements
of an Executive KMP’s remuneration if there has been a misstatement of the financial statements that resulted in the
Executive KMP receiving a reward which exceeds the outcome which would have been achieved had the misstatement
not been made. The clawback provisions are designed to further align the interests of the Executive KMP with the long-
term interests of the Company and to ensure excessive risk-taking is not rewarded.
3.3
Share Trading Policy
The Company’s Share Trading Policy (the “Policy”) applies to all Directors, officers, employees, contractors and
consultants of Slater and Gordon. The Share Trading Policy outlines how and when Directors, officers, employees,
contractors and consultants may deal in Slater and Gordon securities.
If a Director or Executive KMP acquires securities in the Company, they should not sell or agree to sell any Slater and
Gordon securities of that class for at least 30 days.
Directors are prohibited from entering margin loans under the Company’s Share Trading Policy. Relevant Persons (as
defined in the Policy) require prior approval to enter into a margin loan arrangement where the amount of shares
mortgaged, provided as security, lent or charged to a financier, amounts to 1% or more of the issued capital in the
Company at the relevant time. A Relevant Person must notify the Company Secretary immediately if they are given
notice by their financier of an intention to make a margin call and sell the Company’s securities during a prohibited
trading period.
Relevant Persons must not enter into hedging arrangements in relation to securities in the Company that are unvested or
subject to disposal restrictions or minimum shareholding requirements.
The Company’s Share Trading Policy is available on the Slater and Gordon website www.slatergordon.com.au.
Directors’ Report
Audited Remuneration Report (continued)
3.4
Executive KMP employment agreements
The following sets out details of the employment agreements relating to Executive KMP:
Length of Contract
Executive KMP are on rolling contracts, which are ongoing employment
contracts until notice is given by either party.
Resignation
Termination for
cause
Termination in
case of
retirement,
redundancy or
notice without
cause
Termination
payment
CEO notice period
Six (6) months
None
Six (6) months
Six (6) months
CFO notice period
Six (6) months
None
Six (6) months
Six (6) months
Statutory
Entitlements
Post-Employment
Restraints
Payment of statutory entitlements of long service leave and annual leave
applies in all events of separation.
The employment agreement contains a restraint of trade provision which
applies for a period of 9 months and 12 months.
3.5
Cessation and movement of Executive KMP
Cessation of Chief Executive Officer, Australia
As disclosed to the ASX on 7 February 2018, Hayden Stephens resigned as Chief Executive Officer.
The following arrangements applied to Mr. Stephens:
• Mr. Stephens remained on the Board as a Non-Executive Director.
• Mr. Stephens does not receive a Board director fee, but he continued to receive his CEO remuneration during
•
his notice period as part of his termination arrangements.
He received no STI and long-term incentive payments for FY18. He received $52,500 relating to FY17 that was
paid in the FY18 year.
Cessation of Group Chief Financial Officer
As disclosed to the ASX on 31 August 2017, and in relation to the Recapitalisation and the stated intention to separate
the UK and Australian operations, the Company no longer required the Group Financial Officer role post scheme
implementation. Consequently, the Board agreed with the Group Chief Financial Officer, Bryce Houghton, that he would
step down from his role. Mr. Houghton ceased in a KMP role on 31 August 2017 and formally ceased employment from
15 November 2017.
In accordance with Mr. Houghton’s contract of employment, he received the following upon cessation of employment:
•
•
Six months’ salary in lieu of notice; and
Untaken annual leave accrued to the employment Termination Date, all less applicable tax.
He received no STI and long-term incentive payments for FY18 year.
Cessation of Chief Executive Officer, UK
Ken Fowlie ceased as an employee of the Company on 15 December 2017 as a result of the Recapitalisation and
separation of the UK and Australian operations.
Mr. Fowlie’s employment continues as an employee of the UK operations and therefore no separation payments were
made.
3.6 Other transactions and balances with KMP and their related parties
During the year, the Group paid consulting fees to JACM Pty Ltd, of which James MacKenzie (Chair) is a Principal. The
amount of $62,500 was paid to JACM Pty Ltd for consulting services prior to December 2017 and was approved by the
Board.
Slater & Gordon Limited
Page 12
Slater & Gordon Limited
Page 13
21
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
4.0 Overview of Executive KMP Remuneration
This section of the Remuneration Report outlines the principles applied to Executive KMP remuneration decisions and
the framework used to deliver the various components of remuneration, including explanation of the performance and
remuneration linkages.
4.1
How Executive KMP remuneration policies and structures are determined
Slater and Gordon’s remuneration strategy aligns the interests of the executives with those of clients, employees and
shareholders. It is designed to be simple and easy to understand, to reward actual achievement and to drive the long-
term, sustainable success of the Company. The performance of the Company is considered in the overall remuneration
determinations for Executive KMP.
Slater and Gordon applies a robust and disciplined set of guiding principles to remuneration and reward that provides a
level and mix of reward and recognition that:
o Will attract and retain employees with the requisite skills and expertise, and motivate high performance;
o Links company and individual performance;
o Maintains the integrity of the Company’s remuneration principles, strategies and practices;
o Provides a framework for undertaking reviews of remuneration proposals;
o Is compliant with current governance and legislative requirements related to remuneration practices; and
o Aligns the interests of shareholders and employees to enhance the Company’s performance in a
manner that supports the long-term financial soundness of the Company.
4.2
Slater and Gordon’s Executive KMP Remuneration Structures
Slater and Gordon rewards Executive KMP with a level and mix of remuneration appropriate to their position,
responsibilities and performance, in a way that aligns with the business strategy and future success of the Company.
Executive KMP receive fixed remuneration and variable remuneration consisting of short and long-term incentive
opportunities. Executive KMP remuneration levels are reviewed annually by the People and Culture Committee with
reference to the remuneration guiding principles and market movements.
4.3
Elements of remuneration
Fixed remuneration
Fixed remuneration is set to attract, retain and reflect the scope, contribution, skills, capability and experience of the
individual. Fixed remuneration consists of base salary, superannuation (statutory guarantee) and other non-monetary
benefits.
Fixed remuneration is reviewed annually with approved changes effective 1 July. The following factors are taken into
consideration when reviewing executive remuneration:
•
•
•
•
Business performance
Individual performance
Economic climate
External market data
Adjustments to Executive KMP remuneration are reviewed by the People and Culture Committee and approved by the
Board.
22
Slater & Gordon Limited
Page 14
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
4.0 Overview of Executive KMP Remuneration
This section of the Remuneration Report outlines the principles applied to Executive KMP remuneration decisions and
the framework used to deliver the various components of remuneration, including explanation of the performance and
remuneration linkages.
4.1
How Executive KMP remuneration policies and structures are determined
Slater and Gordon’s remuneration strategy aligns the interests of the executives with those of clients, employees and
shareholders. It is designed to be simple and easy to understand, to reward actual achievement and to drive the long-
term, sustainable success of the Company. The performance of the Company is considered in the overall remuneration
determinations for Executive KMP.
Slater and Gordon applies a robust and disciplined set of guiding principles to remuneration and reward that provides a
level and mix of reward and recognition that:
o Will attract and retain employees with the requisite skills and expertise, and motivate high performance;
o Links company and individual performance;
o Maintains the integrity of the Company’s remuneration principles, strategies and practices;
o Provides a framework for undertaking reviews of remuneration proposals;
o Is compliant with current governance and legislative requirements related to remuneration practices; and
o Aligns the interests of shareholders and employees to enhance the Company’s performance in a
manner that supports the long-term financial soundness of the Company.
4.2
Slater and Gordon’s Executive KMP Remuneration Structures
Slater and Gordon rewards Executive KMP with a level and mix of remuneration appropriate to their position,
responsibilities and performance, in a way that aligns with the business strategy and future success of the Company.
Executive KMP receive fixed remuneration and variable remuneration consisting of short and long-term incentive
opportunities. Executive KMP remuneration levels are reviewed annually by the People and Culture Committee with
reference to the remuneration guiding principles and market movements.
Fixed remuneration is set to attract, retain and reflect the scope, contribution, skills, capability and experience of the
individual. Fixed remuneration consists of base salary, superannuation (statutory guarantee) and other non-monetary
Fixed remuneration is reviewed annually with approved changes effective 1 July. The following factors are taken into
consideration when reviewing executive remuneration:
4.3
Elements of remuneration
Fixed remuneration
benefits.
Board.
•
•
•
•
Business performance
Individual performance
Economic climate
External market data
Adjustments to Executive KMP remuneration are reviewed by the People and Culture Committee and approved by the
Directors’ Report
Audited Remuneration Report (continued)
4.3 Elements of remuneration (continued)
Short Term Incentive (STI)
STI is designed to provide a tangible link between the interests of the Executive KMP and the financial performance of
the Company. Under the STI Plan, all Executive KMPs have the opportunity to earn an annual incentive award which
is delivered in cash.
How is it paid?
STI is delivered in cash.
How much can executives earn?
The Company sets STI opportunities annually in the form of an STI cap. STI cap is represented in fixed dollar amounts
and not percentages of base salaries.
STI cap - up to 40% of STI cap for on target performance with a maximum stretch opportunity of 100% of STI cap.
Individual STI targets for FY18*:
Executive
STI Amount
STI Type
John Somerville
Belinda Nucifora
$264,734
$215,000
cap
cap
% of Base
Salary
50%
50%
*Hayden Stephens forfeited STI upon resignation from the role of CEO Australia. Bryce Houghton and Ken Fowlie were not invited to participate in FY18
STI program.
Total Remuneration % (annualised at target) for FY18
Executive
John Somerville
Belinda Nucifora
Total Fixed
Remuneration
67.5%
67.7%
Short Term
Incentive
32.5%
32.3%
In addition to STI targets, the Board may determine from time to time to award a performance or discretionary bonus
to Executive KMP. Incentives are aligned to key financial targets being exceeded.
How is performance measured?
Executive KMPs have company and individual Key Performance Indicators (KPIs). Assessment of performance
measures is completed after the announcement of financial statements. Performance measures are validated and
approved by the Board.
FY18 measures are set out below:
Executive KMP
Financial
EBITDA
100%
Non-Financial
Business unit
KPIs
0%
The non-financial measures in the STI plan are:
•
•
leading transformation initiatives
People as measured by the Company’s values and behaviours
Who sets STI performance measures?
Financial performance measures are set by the Board, based on the recommendation of the People and Culture
Committee.
Individual KPIs are set for Executive KMP (CFO) by the CEO, then reviewed and endorsed by the People and Culture
Committee and Board.
CEO individual and financial KPIs are set and approved by the Board.
When is it paid?
The STI outcome is determined after the end of the financial year and after announcement of financial statements. The
Board approves the final STI award for the Executive KMP, which is paid approximately three months after the end of the
performance period. There are no deferral components.
Slater & Gordon Limited
Page 14
Slater & Gordon Limited
23
Page 15
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
4.3 Elements of remuneration (continued)
What happens if an Executive KMP leaves?
The following details the treatment of STIs on termination:
Resignation: Any potential STI payment is forfeited if an employee tenders their resignation. If an employee has given
notice, but not actually ceased employment, their unpaid incentives are forfeited irrespective of when the performance
period ended.
Dismissal: Any potential STI payment is forfeited if an employee is given notice of dismissal.
Death: Payments will be made to the estate of a deceased employee pro-rated for the eligible period. Payment will be
calculated in accordance with the normal timetable and based on the end of year results.
Total & Permanent Incapacity: Employees will be eligible for payments pro-rated for the eligible period. Payment will be
calculated in accordance with the normal timetable and based on the end of year results.
Retrenchment or other Company initiated termination: At the discretion of the Board.
Long Term Incentive (LTI)
LTI is intended to provide a direct link between the interests of the executive KMP and the long-term success of the
Company. It is also used as an incentive to reward and retain key talent.
LTIs were not offered in FY18 given the financial position of the Company. The Company is currently designing a new
LTI Plan to further provide a direct link between the interests of the participants, shareholders and the long-term success
of the Company. Further information on the proposed plan will be outlined in the FY19 Remuneration Report.
4.4
Changes for FY18
Further simplifications were made to the STI Plan for FY18 to structure the plan in two parts:
Gateway: Employees are allocated to participant groups with baseline performance gateways set for each group.
Importantly, all participants must demonstrate behaviors consistent with Slater and Gordon values and meet
expectations in client service. Once the gateway is met, participants become eligible to be considered for an STI
payment.
STI Payment: Delivery against individual KPIs.
24
Slater & Gordon Limited
Page 16
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
4.3 Elements of remuneration (continued)
What happens if an Executive KMP leaves?
The following details the treatment of STIs on termination:
Resignation: Any potential STI payment is forfeited if an employee tenders their resignation. If an employee has given
notice, but not actually ceased employment, their unpaid incentives are forfeited irrespective of when the performance
period ended.
Dismissal: Any potential STI payment is forfeited if an employee is given notice of dismissal.
Directors’ Report
Audited Remuneration Report (continued)
5.0 FY18 Executive KMP Performance and Remuneration Outcomes
5.1
Actual Remuneration earned by Executives KMP in FY18:
The actual remuneration earned by Executive KMPs in FY18 is set out in section 7 below.
5.2
STI Performance Measures for FY18
Executive KMP were measured on the achievement of budgeted EBITDA. Financial performance was below the
threshold gateway and as a result, the STI award as a percentage of target was 0%.
Death: Payments will be made to the estate of a deceased employee pro-rated for the eligible period. Payment will be
5.3
Long Term Incentive Outcomes
calculated in accordance with the normal timetable and based on the end of year results.
Total & Permanent Incapacity: Employees will be eligible for payments pro-rated for the eligible period. Payment will be
calculated in accordance with the normal timetable and based on the end of year results.
As disclosed in the FY17 Remuneration Report, Hayden Stephens and Ken Fowlie were participants of the FY15 LTI.
Both tranches were assessed by the Board in September 2017, neither performance hurdle was achieved and all
Performance Rights were forfeited.
Retrenchment or other Company initiated termination: At the discretion of the Board.
5.4 Overview of company performance (FY14 to FY18)
The table below sets out information about the Company’s earnings and movements in shareholder wealth for the past
five years up to and including the current financial year.
Company Performance
Revenue ($'000)
Profit before tax ($'000)
Profit after tax ($'000)
Basic earnings per share
(cents)(4)
Diluted earnings per share
(cents)(4)
EBITDAW(5)
Gross Operating Cash Flow less
CAPEX
Dividends per share - paid during
financial year (cents)
Total dividends paid during
financial year (cents)
Share price at 30 June ($)(1)
(1)
2014
Restated(2)
2015
Restated(2)
2016(2)
2017(2)
2018(3)
438,228
95,747
68,236
598,185
85,408
62,374
908,185
(1,029,468)
(1,017,595)
611,485
(551,149)
(546,831)
160,276
(29,238)
(31,916)
3,376.20
2,643.03
(28,877.5)
(15,542.5)
(0.843)
3,316.27
2,624.05
(28,877.5)
(15,542.5)
(0.843)
63,321
62,615
92,586
33,666
49,343
(76,095)
(6,369)
(96,383)
(34,308)
(876)
6.85
8.50
5.50
13,770
515.42
17,620
355.60
19,330
38.96
-
-
-
-
8.09
1.92
Share price stated as at 30 June. As 30 June 2018 was a Saturday, the share price stated in 2018 was as at 29 June 2018. All prior year share
prices were restated for the impact of the 100 to 1 share consolidation that took place on 8 December 2017.
Financial performances were not restated for the discontinued operations that occurred in FY2018. However, the basic earnings per share, diluted
earnings per share and share price at 30 June have been restated for the 100 to 1 share consolidation that took place on 8 December 2017.
2018 profit before tax, profit after tax and EBITDAW from continuing operations.
Basic earnings per share (cents) and diluted earnings per share (cents) were restated for the impact of the 100 to 1 share consolidation that took
place on 8 December 2017. 2018 earnings per share is shown excluding discontinued operations. Prior years are shown for the overall business and
have not been restated for discontinued operations.
EBITDAW is defined as Earnings before net interest, taxes, depreciation, amortisation, impairment and movement in WIP.
(2)
(3)
(4)
(5)
Long Term Incentive (LTI)
LTI is intended to provide a direct link between the interests of the executive KMP and the long-term success of the
Company. It is also used as an incentive to reward and retain key talent.
LTIs were not offered in FY18 given the financial position of the Company. The Company is currently designing a new
LTI Plan to further provide a direct link between the interests of the participants, shareholders and the long-term success
of the Company. Further information on the proposed plan will be outlined in the FY19 Remuneration Report.
4.4
Changes for FY18
Further simplifications were made to the STI Plan for FY18 to structure the plan in two parts:
Gateway: Employees are allocated to participant groups with baseline performance gateways set for each group.
Importantly, all participants must demonstrate behaviors consistent with Slater and Gordon values and meet
expectations in client service. Once the gateway is met, participants become eligible to be considered for an STI
payment.
STI Payment: Delivery against individual KPIs.
Slater & Gordon Limited
Page 16
Slater & Gordon Limited
25
Page 17
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
6.0 Overview of Non-Executive Director remuneration
6.1 Overview of Non-Executive Director remuneration
Slater and Gordon NED fees are designed to attract and retain high calibre directors who can discharge their roles and
responsibilities as required in terms of good governance, strong oversight, independence and objectivity.
NED remuneration is based on fixed director fees and superannuation contributions. The chair of the Board attends all
committee meetings but does not receive any additional committee fees in addition to base fees.
The People and Culture Committee reviews NED remuneration annually against comparable companies. In determining
the level of fees, independent survey data on comparable companies (ASX listed companies if a similar size) was
purchased at the time of the review.
6.2 Maximum aggregate NED fee pool
The maximum aggregate amount that may be paid to NEDs for their services is $950,000 during any financial year, as
approved by shareholders at the 2015 AGM held in November 2015. The Board will not seek an increase to the
aggregate NED fee pool limit at the 2018 AGM.
The table below summarises Board and Committee fees paid to NEDs for FY18 (inclusive of superannuation).
After the appointment of the new Board on 22 December 2017, Slater and Gordon made changes to NED Fees whereby
Board Director fees where changed to be inclusive of additional duties including membership and Chairing of Board
committees.
Board Chair Fee
Board Director Fee
Committee Fees
Audit, Compliance & Risk
Nomination Committee(3)
People and Culture
Committee(4)
22 December 2017 –
1 July 2017 –
30 June 2018
21 December 2017
$240,000(1)
$175,000(2)
$240,000(1)
$120,000
Chair
Member
Chair
Member
Chair
Member
Nil
Nil
Nil
Nil
Nil
Nil
$20,000
$5,000
Nil
$5,000
$10,000
$5,000
Annual Fee Pool
$950,000
$950,000
(1) Committee fees are not paid to the Chair of the Board.
(2) Non-Executive Directors Merrick Howes and Nils Stoesser do not receive payment of Board director fees from the Company. In place of Board director
fee, Non-Executive Director Hayden Stephens transitioned from Chief Executive Officer Australia to a Non-Executive Director on 7 February 2018. He does
not receive a Board director’s fee. He continued to receive his CEO remuneration during his notice period as part of his termination arrangements. This
remuneration does not count towards the total NED Annual Fee Pool.
(3) The Nomination Committee was suspended and did not meet during FY18. There is no intention to bring the Committee out of suspension in FY19.
(4) Formerly known as the Remuneration Committee.
26
Slater & Gordon Limited
Page 18
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
6.0 Overview of Non-Executive Director remuneration
6.1 Overview of Non-Executive Director remuneration
Slater and Gordon NED fees are designed to attract and retain high calibre directors who can discharge their roles and
responsibilities as required in terms of good governance, strong oversight, independence and objectivity.
NED remuneration is based on fixed director fees and superannuation contributions. The chair of the Board attends all
committee meetings but does not receive any additional committee fees in addition to base fees.
The People and Culture Committee reviews NED remuneration annually against comparable companies. In determining
the level of fees, independent survey data on comparable companies (ASX listed companies if a similar size) was
purchased at the time of the review.
6.2 Maximum aggregate NED fee pool
The maximum aggregate amount that may be paid to NEDs for their services is $950,000 during any financial year, as
approved by shareholders at the 2015 AGM held in November 2015. The Board will not seek an increase to the
aggregate NED fee pool limit at the 2018 AGM.
The table below summarises Board and Committee fees paid to NEDs for FY18 (inclusive of superannuation).
After the appointment of the new Board on 22 December 2017, Slater and Gordon made changes to NED Fees whereby
Board Director fees where changed to be inclusive of additional duties including membership and Chairing of Board
committees.
Board Chair Fee
Board Director Fee
Committee Fees
Audit, Compliance & Risk
Nomination Committee(3)
People and Culture
Committee(4)
22 December 2017 –
1 July 2017 –
30 June 2018
21 December 2017
$240,000(1)
$175,000(2)
$240,000(1)
$120,000
Chair
Member
Chair
Member
Chair
Member
Nil
Nil
Nil
Nil
Nil
Nil
$20,000
$5,000
Nil
$5,000
$10,000
$5,000
Annual Fee Pool
$950,000
$950,000
(1) Committee fees are not paid to the Chair of the Board.
(2) Non-Executive Directors Merrick Howes and Nils Stoesser do not receive payment of Board director fees from the Company. In place of Board director
fee, Non-Executive Director Hayden Stephens transitioned from Chief Executive Officer Australia to a Non-Executive Director on 7 February 2018. He does
not receive a Board director’s fee. He continued to receive his CEO remuneration during his notice period as part of his termination arrangements. This
remuneration does not count towards the total NED Annual Fee Pool.
(3) The Nomination Committee was suspended and did not meet during FY18. There is no intention to bring the Committee out of suspension in FY19.
(4) Formerly known as the Remuneration Committee.
Directors’ Report
Audited Remuneration Report (continued)
6.3
FY18 Non-Executive Director Remuneration
The table below includes entries for short term benefits to Merrick Howes and Nils Stoesser, executives employed by
Anchorage Capital Group LLC. The Company does not pay any remuneration to Merrick Howes or Nils Stoesser.
Australian Accounting Standards require disclosure of fees for their roles as Directors of the Company, where they are
paid by their employer, which is the parent entity of the Group. The fees paid by the Company to other Directors were
considered to be representative of this.
Amounts $
Current NEDs
James MacKenzie (Chair) (1)
Merrick Howes (2)
Disclosure required by Australian Accounting Standards – no remuneration was actually paid by the Company
Nils Stoesser (2)
Disclosure required by Australian Accounting Standards – no remuneration was actually paid by the Company
Hayden Stephens (3)
Elana Rubin (4)
Jacqui Walters (4)
Former NEDs
John Skippen (Chair) (5)
Ian Court (8)
Erica Lane (8)
Rhonda O’Donnell (9)
James Millar (6)
Thomas Brown (6)
Andrew Grech (7)
Total(11)
Short-term
benefits
Year
Fees(10)
Post-employment
benefits
Superannuation
benefits
Total
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
120,282
-
82,442
-
82,442
-
-
-
51,633
-
51,633
-
164,963
220,384
-
48,272
-
61,644
-
80,611
104,320
134,151
95,890
102,248
243,552
-
997,157
647,310
10,487
130,769
-
-
-
-
-
-
-
-
82,442
-
82,442
-
-
-
4,905
56,538
-
-
4,905
56,538
-
-
10,410
19,616
-
175,373
240,000
-
19,497
67,769
-
-
5,856
67,500
-
-
7,658
88,269
8,666
112,986
12,580
146,731
8,282
104,172
9,714
9,253
111,962
252,805
-
-
56,908
1,054,065
74,921
722,231
(1)
J MacKenzie commenced as Chair and Non-Executive Director on 22 December 2017.
(2) M Howes and N Stoesser commenced as Non-Executive Directors on 22 December 2017 and are not remunerated by the Company for their services as Non-Executive Directors. The Company was not charged for their
services. Amounts included in the table are not included in the total NED Annual Fee Pool.
(3)
H Stephens transitioned from Chief Executive Officer Australia to a Non-Executive Director on 7 February 2018. He does not receive a Board director’s fee. He continued to receive his CEO remuneration during his
notice period as part of his termination arrangements. This remuneration does not count towards the total NED Annual Fee Pool. Please refer to table 7.1 KMP Remuneration: Statutory Remuneration Outcomes for H
Stephens' remuneration.
E Rubin and J Walters commenced as Non-Executive Directors on 6 March 2018.
J Skippen ceased as Chair and Non-Executive Director on 22 December 2017.
T Brown and J Millar ceased as Non-Executive Directors on 22 December 2017.
A Grech ceased as Group Managing Director on 29 June 2017 and continued as Non-Executive Director of the company until 6 December 2017. The FY17 disclosures represent his remuneration as Group Managing
Director of the Company, which was disclosed under Executive Remuneration Table in prior year. The FY18 disclosures reflect the remuneration received as Non-Executive Director.
I Court and E Lane ceased as Non-Executive Directors on 30 August 2016.
R O'Donnell ceased as a Non-Executive Director on 27 February 2017.
(4)
(5)
(6)
(7)
(8)
(9)
(10) The Fees remunerated includes Non-Executive Director fees and end of contract notice period fees, unless otherwise specified under each of the Non-Executive Directors' notes.
(11) The fees shown attributable to M Howes and N Stoesser are not counted towards the maximum aggregate NED fee pool.
Slater & Gordon Limited
Page 18
Slater & Gordon Limited
27
Page 19
Slater & Gordon Limited Annual Report 2018 l
a
t
o
T
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
R
%
0
.
0
%
0
.
0
%
0
.
0
%
0
.
0
%
0
.
0
%
2
.
1
%
0
.
0
y
t
i
u
q
e
s
a
d
e
r
e
v
i
l
e
D
-
m
r
o
f
r
e
P
e
c
n
a
d
e
t
a
e
r
l
l
a
t
o
T
-
n
u
m
e
R
n
o
i
t
a
r
e
%
0
.
0
5
3
3
0
2
2
,
%
0
.
0
%
0
.
0
%
0
.
0
%
0
.
0
%
2
.
1
%
0
.
0
-
-
4
5
0
2
2
4
,
4
8
3
4
5
2
,
3
8
1
9
5
5
,
7
8
7
0
8
4
,
%
9
.
3
5
%
8
.
9
5
%
0
.
0
%
3
.
1
%
0
.
0
)
%
9
.
1
(
%
0
.
0
%
7
.
0
2
%
3
.
7
%
3
.
1
%
0
.
0
)
%
9
.
1
(
%
4
.
2
%
0
.
3
2
-
1
2
7
1
2
7
,
1
6
3
3
3
5
,
,
8
1
0
9
5
6
1
,
,
5
2
6
0
0
5
1
,
,
1
8
2
9
9
0
2
,
,
7
8
1
2
5
2
4
,
i
e
c
v
r
e
S
f
o
d
n
E
y
a
p
e
l
b
a
i
r
a
V
l
a
t
o
T
u
t
c
a
r
t
n
o
C
e
c
i
t
o
N
l
a
d
o
i
r
e
P
d
e
s
u
n
U
y
r
o
t
u
t
a
t
S
e
v
a
e
L
s
e
c
n
a
l
a
B
l
a
t
o
T
-
g
n
o
L
m
r
e
t
-
m
r
o
f
r
e
P
e
c
n
a
/
s
t
h
g
R
i
s
n
o
i
t
p
O
-
t
r
o
h
S
m
r
e
t
h
s
a
C
s
u
n
o
B
l
a
t
o
T
g
n
o
L
e
c
i
v
r
e
s
e
v
a
e
l
-
r
e
p
u
S
n
o
i
t
a
u
n
n
a
s
t
i
f
e
n
e
b
r
e
h
t
O
s
t
i
f
e
n
e
b
-
n
o
N
y
r
a
t
e
n
o
m
s
t
i
f
e
n
e
b
-
t
s
o
P
e
m
y
o
p
m
e
l
n
o
i
t
a
r
e
n
u
m
e
R
d
e
x
i
F
m
r
e
t
-
g
n
o
L
t
n
m
r
e
t
-
t
r
o
h
S
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
5
9
6
,
2
5
9
,
6
2
9
5
6
5
3
,
6
7
9
4
1
3
,
6
1
6
1
4
,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- -
-
8
8
0
3
6
6
,
2
9
5
6
5
3
,
8
8
0
3
6
6
,
6
9
8
2
8
3
,
6
7
9
4
1
3
,
6
9
8
2
8
3
,
2
9
1
0
8
2
,
6
1
6
1
4
,
2
9
1
0
8
2
,
0
3
9
1
9
9
,
0
3
4
,
4
9
8
-
2
5
9
6
,
0
0
5
2
5
,
-
-
2
5
9
,
6
)
3
5
9
8
2
(
,
)
3
5
9
,
8
2
(
-
-
-
0
0
5
,
7
9
0
0
5
,
2
5
0
0
5
2
5
,
1
8
8
6
7
9
,
-
1
8
3
,
9
7
8
0
0
5
,
2
5
0
0
5
,
7
9
-
-
-
5
3
3
,
0
2
2
1
5
4
,
2
2
4
9
,
7
-
-
4
5
0
,
2
2
4
8
3
2
,
4
0
6
9
,
4
1
2
6
3
3
6
,
-
4
8
3
,
4
5
2
1
3
2
,
2
5
5
5
9
1
,
4
2
1
8
8
0
,
7
6
6
1
2
2
,
9
6
6
9
0
4
,
6
2
5
-
0
9
4
,
6
6
8
9
8
1
,
0
9
6
,
1
8
1
2
,
2
1
6
,
2
-
-
-
-
3
5
0
,
3
1
8
9
1
,
1
6
9
4
4
,
0
3
-
-
7
8
8
,
7
6
2
0
5
,
3
4
-
9
3
9
,
4
3
2
7
,
0
1
6
5
8
,
3
9
6
7
,
0
4
9
4
0
,
0
2
6
1
6
,
9
1
-
1
2
7
,
1
3
6
4
7
,
1
5
9
2
8
,
2
0
1
-
-
-
-
-
-
-
-
2
6
4
,
6
8
2
2
6
3
3
6
,
2
6
4
6
8
2
,
-
-
-
-
1
7
4
,
2
8
4
3
,
5
8
7
2
,
2
6
8
0
,
1
1
0
6
9
,
8
5
6
8
,
4
1
-
-
9
0
7
,
3
1
9
9
2
,
1
3
2
4
9
,
9
0
2
y
r
a
l
a
S
-
-
4
9
4
,
9
3
3
4
7
9
,
6
4
2
0
6
1
,
6
3
5
1
6
0
,
8
1
1
0
8
1
,
2
0
6
4
1
0
,
9
7
5
9
7
4
,
1
6
4
-
7
0
3
,
8
4
5
5
8
4
,
3
9
4
,
1
6
2
1
,
8
4
1
,
2
8
1
Y
F
r
a
e
Y
7
1
Y
F
8
1
Y
F
7
1
Y
F
e
m
a
N
e
l
l
i
v
r
e
m
o
S
n
h
o
J
)
1
(
)
2
(
a
r
o
f
i
c
u
N
a
d
n
i
l
e
B
P
M
K
e
v
i
t
u
c
e
x
E
r
e
m
r
o
F
8
1
Y
F
7
1
Y
F
8
1
Y
F
7
1
Y
F
8
1
Y
F
7
1
Y
F
8
1
Y
F
7
1
Y
F
8
1
Y
F
7
1
Y
F
)
4
(
n
o
t
h
g
u
o
H
e
c
y
r
B
)
5
(
s
n
e
h
p
e
t
S
n
e
d
y
a
H
)
3
(
e
i
l
w
o
F
n
e
K
w
e
r
d
n
A
)
6
(
h
c
e
r
G
l
a
t
o
T
l
a
t
o
T
i
n
o
p
u
m
h
o
t
d
a
p
i
s
i
i
h
c
h
w
t
n
e
m
y
a
p
n
o
i
t
a
n
m
r
e
t
i
i
s
h
s
t
n
e
s
e
r
p
e
r
t
i
f
e
n
e
b
i
e
c
v
r
e
S
f
o
d
n
E
e
h
T
.
7
1
0
2
r
e
b
m
e
v
o
N
5
1
n
o
p
u
o
r
G
e
h
t
d
e
t
r
a
p
e
d
d
n
a
7
1
0
2
t
s
u
g
u
A
1
3
n
o
r
e
c
i
f
f
O
l
i
a
c
n
a
n
F
i
i
f
e
h
C
p
u
o
r
G
s
a
d
e
s
a
e
c
n
o
t
h
g
u
o
H
B
.
7
1
0
2
r
e
b
m
e
c
e
D
5
1
o
t
p
u
i
d
e
v
e
c
e
r
n
o
i
t
a
r
e
n
u
m
e
r
e
h
t
t
c
e
l
f
e
r
e
v
o
b
a
s
l
i
a
t
e
d
e
h
T
.
7
1
0
2
r
e
b
m
e
c
e
D
5
1
n
o
y
n
a
p
m
o
C
e
h
t
f
o
t
r
a
p
e
b
o
t
d
e
s
a
e
c
e
i
l
w
o
F
K
2
5
9
6
.
1
:
f
o
P
B
G
o
t
D
U
A
f
o
e
t
a
r
e
g
n
a
h
c
x
e
e
g
a
r
e
v
a
n
a
i
g
n
s
u
D
U
A
o
t
d
e
t
r
e
v
n
o
c
n
e
e
b
s
a
h
i
h
c
h
w
,
g
n
i
l
r
e
t
S
d
n
u
o
P
n
i
i
d
a
p
s
a
w
e
i
l
w
o
F
K
.
8
1
0
2
y
r
a
u
r
b
e
F
7
n
o
r
e
c
i
f
f
O
e
v
i
t
u
c
e
x
E
i
f
e
h
C
s
a
d
e
c
n
e
m
m
o
c
e
l
l
i
v
r
e
m
o
S
J
.
7
1
0
2
r
e
b
o
t
c
O
2
n
o
r
e
c
i
f
f
O
l
i
a
c
n
a
n
F
i
i
f
e
h
C
s
a
d
e
c
n
e
m
m
o
c
a
r
o
f
i
c
u
N
B
.
d
o
i
r
e
p
e
c
i
t
o
n
i
s
h
i
g
n
d
u
c
n
l
i
e
m
o
c
n
i
r
a
e
y
l
l
u
f
e
h
t
t
c
e
l
f
e
r
e
v
o
b
a
s
l
i
t
a
e
d
e
h
T
.
8
1
0
2
y
r
a
u
r
b
e
F
7
n
o
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
-
n
o
N
o
t
a
i
l
a
r
t
s
u
A
r
e
c
i
f
f
O
e
v
i
t
u
c
e
x
E
i
f
e
h
C
m
o
r
f
d
e
n
o
i
t
i
s
n
a
r
t
s
n
e
h
p
e
S
H
t
.
y
n
a
p
m
o
C
e
h
t
f
o
r
e
c
i
f
f
O
l
i
a
c
n
a
n
F
i
i
f
e
h
C
p
u
o
r
G
s
a
n
o
i
t
a
s
s
e
c
3
.
6
l
e
b
a
T
r
e
d
n
u
d
e
s
o
c
s
d
i
l
n
e
e
b
s
a
h
n
o
i
t
a
r
e
n
u
m
e
r
8
1
Y
F
s
h
c
e
r
G
A
'
.
7
1
0
2
r
e
b
m
e
c
e
D
6
l
i
t
n
u
y
n
a
p
m
o
c
e
h
t
f
o
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
-
n
o
N
s
a
d
e
u
n
i
t
n
o
c
d
n
a
7
1
0
2
e
n
u
J
9
2
n
o
r
o
t
c
e
r
i
i
D
g
n
g
a
n
a
M
p
u
o
r
G
s
a
d
e
s
a
e
c
h
c
e
r
G
A
)
1
(
)
2
(
)
3
(
)
4
(
)
5
(
)
6
(
l
.
e
b
a
T
n
o
i
t
a
r
e
n
u
m
e
R
l
a
t
o
T
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
-
n
o
N
0
2
e
g
a
P
d
e
t
i
i
m
L
n
o
d
r
o
G
&
r
e
t
a
S
l
l
i
e
r
u
s
o
c
s
D
y
r
o
t
u
t
a
t
S
–
e
l
b
a
T
n
o
i
t
a
r
e
n
u
m
e
R
P
M
K
e
v
i
t
u
c
e
x
E
1
.
7
)
d
e
u
n
i
t
n
o
c
(
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
d
e
t
i
d
u
A
n
o
i
t
a
r
e
n
u
m
e
R
P
M
K
e
v
i
t
u
c
e
x
E
l
a
u
t
c
A
0
.
7
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
28
Slater & Gordon Limited Annual Report 2018
Directors’ Report
Audited Remuneration Report (continued)
7.2 Executive KMP Equity Plans
As described in Section 5.3, the FY15 LTI plan is the only equity plan in which Executive KMP continued to participate
during FY18. The FY15 LTI has two testing dates to determine if any performance rights may vest, being 30 June 2017
for EPS, and 31 August 2017 of RTSR. Formal assessment of performance hurdles were assessed by the Board in
September 2017. Neither performance hurdle was achieved and all Performance Rights were forfeited.
7.3 Vesting and Exercise of Performance Rights granted as Remuneration
During FY18, no performance rights or options were vested, exercised, or granted.
7.4 Shareholding of Executive KMP and NEDs
In accordance with the Corporations Act (section 205G(1)), the Company is required to notify the interests (shares and
rights to shares) of directors to the ASX. In the interests of transparency and completeness of disclosure, this information
is provided for each NED (as required under the Corporations Act) and all Executive KMP. Please refer section 3.3 for
more information on prohibition on hedging and margin lending.
The table below indicates shareholdings of the KMP:
Executive KMP
Number held at
1 July 2017
James MacKenzie
Merrick Howes
Nils Stoesser
-
-
-
Impact of share
consolidation
and issuance(1)
-
-
-
Hayden Stephens
4,804,115
(4,212,563)
Elana Rubin
Jacqui Walters
John Somerville
Belinda Nucifora
-
-
-
-
-
-
-
-
Former Non-Executive Directors
John Skippen
James Millar
Andrew Grech
Ken Fowlie
Tom Brown
Bryce Houghton
100,000
20,000
(99,000)
(19,800)
7,000,656
(6,930,649)
5,646,221
(5,589,758)
-
-
-
-
Total
17,570,992
(16,851,770)
Acquisitions
Disposals
Number held at 30
June 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(579,026)(2)
-
-
-
-
-
(200)
(3,700)
-
-
-
-
-
-
12,526
-
-
-
-
1,000
-
66,307
56,463
-
-
(582,926)
136,296
(1) Refers to the impacts of the 1 for 100 share consolidation and the issuance of a further 66,050,874 shares as part of the Senior Lender Scheme of Arrangement completed on 22
December 2017.
(2) Represents 549,000 shares disposed on 11 September 2017 (pre-share consolidation) and 22,000 shares disposed on 8 March 2018, 8,026 shares disposed on 12 March 2018
(post share consolidation)
Slater & Gordon Limited
Page 21
29
Slater & Gordon Limited Annual Report 2018
Directors’ Report
Audited Remuneration Report (continued)
7.5 Movement in Executive KMP Holdings: Performance rights over ordinary shares
During the financial year, the movement in the number and value of performance rights over ordinary shares of Slater
and Gordon Limited acquired under LTI, held by executive KMP is detailed below:
Number
held at
1 July
2017
Number
offered in
year
Offer
Value
Number
exercised
in year
Intrinsic
Value ($)
Number
forfeited
during
year
Number
held at 30
June 2018
Intrinsic
Value at
30 June
2018 ($)
John Somerville
Belinda Nucifora
-
-
Former Executive KMP
Andrew Grech
-
Ken Fowlie
16,000
Hayden Stephens
16,000
Bryce Houghton
-
Total
32,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,000
16,000
-
32,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
End of Remuneration Report
Slater & Gordon Limited
30
Page 22
Slater & Gordon Limited Annual Report 2018 Directors’ Report
Audited Remuneration Report (continued)
7.5 Movement in Executive KMP Holdings: Performance rights over ordinary shares
During the financial year, the movement in the number and value of performance rights over ordinary shares of Slater
and Gordon Limited acquired under LTI, held by executive KMP is detailed below:
Number
held at
1 July
2017
Number
offered in
year
Offer
Value
Number
exercised
Intrinsic
Value ($)
in year
Number
forfeited
during
year
Number
held at 30
June 2018
Intrinsic
Value at
30 June
2018 ($)
John Somerville
Belinda Nucifora
Former Executive KMP
Andrew Grech
Ken Fowlie
16,000
Hayden Stephens
16,000
Bryce Houghton
Total
32,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,000
16,000
32,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of
Slater and Gordon Limited
As lead auditor for the audit of Slater and Gordon Limited and Controlled Entities for the financial year
ended 30 June 2018, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Slater and Gordon Limited and Controlled Entities it controlled during
the financial year.
End of Remuneration Report
Ernst & Young
Christopher George
Partner
Melbourne
29 August 2018
Slater & Gordon Limited
Page 22
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 23
31
Slater & Gordon Limited Annual Report 2018
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the Year Ended 30 June 2018
Revenue
Fee revenue
Net movement in work in progress
Revenue from contracts with customers
Other income
Total revenue and other income
Less expenses
Salaries and employee benefit expense
Payments to former owners
Share based payment expense to former owners
Rental expense
Advertising, marketing and new business development expense
Administration and office expense
Consultant fees
Finance costs
Bad and doubtful debts
Depreciation and amortisation expense
Other expenses
Impairment of intangible assets
Loss from continuing operations before income tax expense
Income tax expense / (benefit)
Loss from continuing operations for the year after income tax
Note
3.1
3.2
3.2
3.2
4.1
3.4
Discontinued Operations
Pre-tax (loss) from discontinued operations
Income tax expense / (benefit) from discontinued operations
Net gain from disposal of discontinued operations
Income tax (benefit) on disposal of discontinued operations
Profit / (loss) from discontinued operations after income tax
Profit / (loss) for the year after income tax
10.1
3.4, 10.1
10.1
3.4, 10.1
Profit / (loss) for the year attributed to:
Owners of the Company
Non-controlling interests
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations
Changes in fair value of cash flow hedges
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income / (loss) for the year, net of tax
Total comprehensive income / (loss) for the year attributed to:
Owners of the Company
Non-controlling interests
2018
$’000
162,166
(2,916)
159,250
1,026
160,276
97,048
-
1,364
10,331
12,567
21,407
7,103
16,371
11,612
3,710
8,001
-
(29,238)
2,678
(31,916)
(61,059)
(2,904)
187,591
(16,210)
145,646
113,730
113,726
4
113,730
(10,414)
(250)
(10,664)
103,066
103,067
(1)
103,066
Restated(1)
2017
$’000
194,024
(12,551)
181,473
1,541
183,014
116,953
3,875
4,440
16,760
13,975
40,106
17,669
19,378
14,202
5,488
15,478
10,959
(96,269)
(21,810)
(74,459)
(454,880)
17,492
-
-
(472,372)
(546,831)
(546,549)
(282)
(546,831)
(8,188)
1,721
(6,467)
(553,298)
(553,014)
(284)
(553,298)
(1)
The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
Slater and Gordon Limited
32
Page 24
Slater & Gordon Limited Annual Report 2018 Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the Year Ended 30 June 2018
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the Year Ended 30 June 2018
Total comprehensive income / (loss) for the year attributed to
owners of the Company from:
Continuing operations
Discontinued operations
Earnings / (loss) per share from continuing operations:
Basic (loss) per share
Diluted (loss) per share
Earnings / (loss) per share from discontinued operations
Basic / (loss) earnings per share
Diluted earnings / (loss) per share
The accompanying notes form an integral part of these financial statements.
Note
3.6
3.6
3.6
3.6
2018
$’000
(31,916)
134,983
103,067
(0.843)
(0.843)
Restated(1)
2017
$’000
(74,459)
(478,555)
(553,014)
(21.168)
(21.168)
3.847
3.847
(134.213)
(134.213)
Note
3.1
3.2
3.2
3.2
4.1
3.4
Revenue
Fee revenue
Net movement in work in progress
Revenue from contracts with customers
Other income
Total revenue and other income
Less expenses
Salaries and employee benefit expense
Payments to former owners
Administration and office expense
Consultant fees
Finance costs
Bad and doubtful debts
Depreciation and amortisation expense
Other expenses
Impairment of intangible assets
Share based payment expense to former owners
Rental expense
Advertising, marketing and new business development expense
Loss from continuing operations before income tax expense
Income tax expense / (benefit)
Loss from continuing operations for the year after income tax
Discontinued Operations
Pre-tax (loss) from discontinued operations
Income tax expense / (benefit) from discontinued operations
Net gain from disposal of discontinued operations
Income tax (benefit) on disposal of discontinued operations
Profit / (loss) from discontinued operations after income tax
Profit / (loss) for the year after income tax
10.1
3.4, 10.1
10.1
3.4, 10.1
Profit / (loss) for the year attributed to:
Owners of the Company
Non-controlling interests
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations
Changes in fair value of cash flow hedges
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income / (loss) for the year, net of tax
Total comprehensive income / (loss) for the year attributed to:
Owners of the Company
Non-controlling interests
2018
$’000
162,166
(2,916)
159,250
1,026
160,276
97,048
-
1,364
10,331
12,567
21,407
7,103
16,371
11,612
3,710
8,001
-
(29,238)
2,678
(31,916)
(61,059)
(2,904)
187,591
(16,210)
145,646
113,730
113,726
4
113,730
(10,414)
(250)
(10,664)
103,066
103,067
(1)
103,066
Restated(1)
2017
$’000
194,024
(12,551)
181,473
1,541
183,014
116,953
3,875
4,440
16,760
13,975
40,106
17,669
19,378
14,202
5,488
15,478
10,959
(96,269)
(21,810)
(74,459)
(454,880)
17,492
-
-
(472,372)
(546,831)
(546,549)
(282)
(546,831)
(8,188)
1,721
(6,467)
(553,298)
(553,014)
(284)
(553,298)
(1)
The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
(1)
The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
Slater and Gordon Limited
Page 24
Slater and Gordon Limited
Page 25
33
Slater & Gordon Limited Annual Report 2018
Consolidated Statement of Financial Position
As at 30 June 2018
Current assets
Cash and cash equivalents
Receivables
Work in progress
Current tax assets
Other current assets
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Receivables
Work in progress
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Short term borrowings
Current tax liabilities
Other current liabilities
Provisions
Total current liabilities
Non-current liabilities
Long term borrowings
Deferred tax liabilities
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Contributed equity
Reserves
Accumulated losses
Total equity attributable to equity holders in the Company
Non-controlling interest
Total equity
The accompanying notes form an integral part of these financial statements.
Note
4.2
4.3
3.4
10.8
4.4
4.2
4.3
4.1
3.4
4.5
5.2
3.4
4.6
5.2
3.4
4.6
5.5
2018
$’000
18,778
70,498
110,764
-
7,871
133
2017
$’000
33,303
395,466
294,871
3
21,144
-
208,044
744,787
9,372
16,411
115,029
797
-
417
142,026
350,070
52,091
11,798
-
-
21,757
85,646
143,321
49,531
-
8,277
201,129
286,775
63,295
1,348,581
12,885
26,555
91,492
220,094
13,112
34,718
536
386,507
1,131,294
418,619
466,240
8,250
1,815
54,532
949,456
314,702
93,361
1,419
21,172
430,654
1,380,110
(248,816)
1,119,235
44,023
(1,298,171)
(1,411,897)
63,295
(248,639)
-
(177)
63,295
(248,816)
34
Slater and Gordon Limited
Page 26
Slater & Gordon Limited Annual Report 2018 Current assets
Cash and cash equivalents
Receivables
Work in progress
Current tax assets
Other current assets
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Receivables
Work in progress
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Short term borrowings
Current tax liabilities
Other current liabilities
Provisions
Total current liabilities
Non-current liabilities
Long term borrowings
Deferred tax liabilities
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Contributed equity
Reserves
Accumulated losses
Non-controlling interest
Total equity
Note
4.2
4.3
3.4
10.8
4.4
4.2
4.3
4.1
3.4
4.5
5.2
3.4
4.6
5.2
3.4
4.6
5.5
208,044
744,787
2017
$’000
33,303
395,466
294,871
21,144
3
-
26,555
91,492
220,094
13,112
34,718
536
386,507
1,131,294
418,619
466,240
8,250
1,815
54,532
949,456
314,702
93,361
1,419
21,172
430,654
1,380,110
(248,816)
1,119,235
44,023
2018
$’000
18,778
70,498
110,764
-
7,871
133
9,372
16,411
115,029
797
-
417
142,026
350,070
52,091
11,798
21,757
85,646
143,321
49,531
8,277
201,129
286,775
63,295
-
-
-
-
1,348,581
12,885
(1,298,171)
(1,411,897)
63,295
(248,639)
(177)
63,295
(248,816)
Consolidated Statement of Financial Position
As at 30 June 2018
Consolidated Statement of Changes In Equity
For the Year Ended 30 June 2018
2018
Note Contributed
Equity
Accumulat
ed Losses
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Share-based
Payment
Reserve
Total
Non-
controlling
interest
Total
Equity
Balance as at 1 July 2017
Net profit after tax for the year
Total other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity
as owners
Issuance of shares under Senior Lender
Scheme
Reclassification to profit or loss on
extinguishment of debt
Reclassification to profit or loss on disposal of
discontinued operations
Transfer from share based payments reserve
5.5
Performance rights
Recognition of share based payments expense
to former owners
Total transactions with owners in their
capacity as owners
-
-
-
5.5
221,270
-
-
8,076
-
-
229,346
$’000
$’000
1,119,235
(1,411,897)
$’000
$’000
$’000
$’000
$’000
27,513
17,108
(248,639)
(177)
(248,816)
113,726
-
-
(250)
(10,409)
113,726
(250)
(10,409)
$’000
(598)
-
-
848
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
113,726
(10,659)
4
(5)
113,730
(10,664)
103,067
(1)
103,066
221,270
848
-
-
221,270
848
(17,104)
178
(16,926)
-
-
-
(8,076)
8
-
8
3,845
3,845
-
-
-
-
8
3,845
-
-
(17,104)
Balance as at 30 June 2018
2017
Balance as at 1 July 2016
Net loss after tax for the year
Total other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with owners in their capacity
as owners
Ordinary and VCR shares issued / (bought
back)
Cancellation of VCR shares
848
(17,104)
(4,223)
208,867
178
209,045
1,348,581
(1,298,171)
-
-
12,885
Note
Contributed
Equity
Accumulat
ed Losses
Cash Flow
Hedging
Reserve
Foreign
Currency
Translation
Reserve
Share-based
Payment
Reserve
63,295
Total
-
Non-
controlling
interest
63,295
Total
Equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
1,116,048
(865,348)
(2,319)
35,699
20,910
304,990
107
305,097
-
-
-
(546,549)
-
-
-
1,721
(8,186)
(546,549)
1,721
(8,186)
(546,549)
(282)
(546,831)
(6,465)
(2)
(6,467)
(553,014)
(284)
(553,298)
5.5
(9,232)
525
11,907
-
(13)
-
3,187
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,232)
525
-
7,170
7,170
-
935
(13)
935
(3,802)
(615)
-
-
-
-
-
-
(9,232)
525
-
7,170
(13)
935
(615)
-
-
-
-
-
(11,907)
Total equity attributable to equity holders in the Company
The accompanying notes form an integral part of these financial statements.
Transfer from share based payments reserve
5.5
Recognition of share based payments expense
to former owners
Costs of share registry
Performance rights
5.5
Total transactions with owners in their
capacity as owners
Balance as at 30 June 2017
1,119,235
(1,411,897)
(598)
27,513
17,108
(248,639)
(177)
(248,816)
The accompanying notes form an integral part of these financial statements.
Slater and Gordon Limited
Page 26
Slater and Gordon Limited
Page 27
35
Slater & Gordon Limited Annual Report 2018 Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
Note
2018
$’000
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Payments to former owners
Interest received
Borrowing costs
Net income tax (paid) / refunded
Net cash (used in) operating activities of continuing operations
Net cash (used in) operating activities of discontinued operations
Total net cash (used in) operating activities
3.3
Cash flow from investing activities
Payment for software development
Payment for plant and equipment
Deposits for bank guarantees
Costs associated with acquisition of businesses
Cash balance transferred on disposal of business
Payment for acquisition of businesses – deferred consideration
Net cash flow (used in) investing activities of continuing operations
Net cash (used in) investing activities of discontinued operations
Total net cash (used in) investing activities
Cash flow from financing activities
Costs of share registry management
Loans repaid / (advanced) to related parties and employees
Proceeds from borrowings
Repayment of borrowings
Net cash provided by financing activities of continuing operations
Net cash provided by / (used in) financing activities of discontinued operations
Total net cash provided by financing activities
Net decrease in cash held
Net increase / (decrease) in foreign exchange differences
Cash at the beginning of the financial year
Cash at the end of the financial year
The accompanying notes form an integral part of these financial statements.
212,883
(209,950)
(5,250)
-
(2,483)
(3,180)
(7,980)
(40,262)
(48,242)
(820)
(2,989)
(3,933)
-
(18,439)
(425)
(26,606)
(7,137)
(33,743)
-
410
62,854
(5,091)
58,173
8,475
66,648
(15,337)
812
33,303
18,778
Restated(1)
2017
$’000
196,004
(213,186)
(9,000)
221
(3,885)
7,626
(22,220)
(16,868)
(39,088)
(1,232)
(1,814)
-
(2)
-
(2,073)
(5,121)
(6,648)
(11,769)
(13)
(504)
15,002
(3,555)
10,930
(5,280)
5,650
(45,207)
(3,984)
82,494
33,303
(1)
The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
36
Slater and Gordon Limited
Page 28
Slater & Gordon Limited Annual Report 2018
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
Note
2018
$’000
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Payments to former owners
Interest received
Borrowing costs
Net income tax (paid) / refunded
Net cash (used in) operating activities of continuing operations
Net cash (used in) operating activities of discontinued operations
Total net cash (used in) operating activities
3.3
Cash flow from investing activities
Payment for software development
Payment for plant and equipment
Deposits for bank guarantees
Costs associated with acquisition of businesses
Cash balance transferred on disposal of business
Payment for acquisition of businesses – deferred consideration
Net cash flow (used in) investing activities of continuing operations
Net cash (used in) investing activities of discontinued operations
Total net cash (used in) investing activities
Cash flow from financing activities
Costs of share registry management
Loans repaid / (advanced) to related parties and employees
Proceeds from borrowings
Repayment of borrowings
Net cash provided by financing activities of continuing operations
Net cash provided by / (used in) financing activities of discontinued operations
Total net cash provided by financing activities
Net decrease in cash held
Net increase / (decrease) in foreign exchange differences
Cash at the beginning of the financial year
Cash at the end of the financial year
The accompanying notes form an integral part of these financial statements.
Restated(1)
2017
$’000
196,004
(213,186)
(9,000)
221
(3,885)
7,626
(22,220)
(16,868)
(39,088)
(1,232)
(1,814)
(2)
-
-
(2,073)
(5,121)
(6,648)
(11,769)
(13)
(504)
15,002
(3,555)
10,930
(5,280)
5,650
(45,207)
(3,984)
82,494
33,303
212,883
(209,950)
(5,250)
-
(2,483)
(3,180)
(7,980)
(40,262)
(48,242)
(820)
(2,989)
(3,933)
-
(18,439)
(425)
(26,606)
(7,137)
(33,743)
-
410
62,854
(5,091)
58,173
8,475
66,648
(15,337)
812
33,303
18,778
Notes to the Financial Statements
For the Year Ended 30 June 2018
Note 1: Basis of Preparation
This note sets out the accounting policies adopted by Slater and Gordon Limited (the “Company” or “Parent”) and its
consolidated entities (the “Consolidated Entity” or the “Group”) in the preparation and presentation of the financial report.
Where an accounting policy is specific to one note, the policy is described within the note to which it relates.
The financial report was authorised for issue by the directors as at the date of the Directors’ Report.
Slater and Gordon Limited is a Company limited by shares, incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange.
1.1.
Basis of Accounting
This financial report is a general purpose financial report, for a ‘for-profit’ entity, which has been prepared in accordance
with Australian Accounting Standards, Interpretations and other applicable authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act 2001. The consolidated financial statements of Slater
and Gordon Limited also comply with the International Financial Reporting Standards (“IFRS”) issued by the International
Accounting Standards Board (“IASB”).
The financial report has been prepared under the historical cost convention, except where noted.
The consolidated financial statements provide comparative information in respect of the previous period.
Where necessary, comparative figures have been reclassified and repositioned for consistency with current year
disclosures.
The parent entity and the consolidated entity have applied the relief available under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 and accordingly, amounts in the consolidated financial statements and
Directors’ Report have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Going Concern
The financial statements have been prepared using the going concern assumption which contemplates the realisation of
assets and the settlement of liabilities in the ordinary course of business.
The Recapitalisation of the Group was deemed effective from 15 December 2017 and implemented on 22 December
2017 after passing the requisite Shareholders’ approval at the AGM on 6 December 2017.
Following implementation of the Recapitalisation, the Directors have determined that there is no longer a material
uncertainty that exists in relation to the Group’s ability to continue as a going concern due to the debt facilities having
been restated to a sustainable level, additional liquidity being provided via extended working capital facilities and
ownership of the UK being separated and transferred.
The Group permanently reduced its outstanding secured debt under the Recapitalisation (refer Note 5). As at 30 June
2018, the Group’s total borrowings (excluding lease liabilities) were $155,118,000. Of this, $11,798,000 is presented as
current liabilities, being due for repayment in the next 12 months. The remaining $143,321,000 of debt is non-current.
Furthermore, as at 30 June 2018, the Group has a positive net current asset balance of $122,398,000 and a positive
overall net asset balance of $63,295,000. Based on internal cash flow forecasts to 31 August 2019, the Group expects to
remain in compliance with financial covenants under the New Super Senior Facility and has sufficient funds available to
meet its obligations.
Consequently, the Directors have concluded that there are reasonable grounds to believe that the Group will continue to
be able to pay its debts as and when they become due and payable, and the preparation of the 30 June 2018 financial
report on a going concern basis is appropriate.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the parent entity and of all entities which the
parent entity controls. The Group controls an entity when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All inter-company balances and transactions, including any unrealised profits or losses, have been eliminated on
consolidation. Subsidiaries are consolidated from the date on which control is established and are de-recognised from
the date that control ceases.
Non-controlling interests in the results of subsidiaries are shown separately in the Consolidated Statement of Profit or
Loss and Other Comprehensive Income and Consolidated Statement of Financial Position.
Any changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions.
(1)
The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
Slater and Gordon Limited
Page 28
Slater and Gordon Limited
Page 29
37
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
1.2.
Adoption of New Accounting Standards
The Company adopted all the new mandatory standards and interpretations for the current reporting period. This
included application of amendments in AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure
Initiative: Amendments to AASB 107, which require disclosure of changes in liabilities arising from financing activities,
see Note 5.2.2. Except for the above amendment, the adoption of these standards and interpretations did not result in a
material change to the reported results and position or disclosures of the Group as they did not result in any changes to
the Group’s existing accounting policies.
1.3.
Significant Accounting Judgements, Estimates and Assumptions
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions
that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to estimates are recognised prospectively.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty are outlined in detail within the specific note to which they relate.
1.4.
Foreign Currency Translations and Balances
Functional and Presentation Currency
The consolidated financial statements are presented in Australian dollars which is also the functional currency of the
parent entity and all Australian subsidiaries. The financial statements of each entity within the consolidated entity are
measured using the currency of the primary economic environment in which that entity operates (the functional
currency).
Transactions and Balances
Transactions in foreign currencies of entities within the consolidated group are translated into the respective functional
currency of each entity at the rate of exchange ruling at the date of the transaction. The assets, liabilities and results of
foreign operations where their functional currency is different to the presentation currency are translated as disclosed
below.
Foreign currency monetary items that are outstanding at the reporting date are translated using the spot rate at the end
of the financial year.
Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or re-statement of
monetary items are recognised as income and expenses in profit or loss for the financial year.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions and are not remeasured unless they are carried at fair value.
Foreign Operations
On consolidation, the assets and liabilities of foreign operations are translated into the presentation currency of the
Group at the closing rate on the reporting date. Income and expenses are translated at average exchange rates for the
period, unless the exchange rate fluctuated significantly during the period, in which case the exchange rates at the dates
of the transactions are used. All resulting exchange differences are recognised in Other Comprehensive Income and
accumulated in the foreign currency translation reserve, a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
Note 2: Segment Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other
components.
Following the restructure of the Group completed during the period, the Group has one reportable segment, which
provides legal services in Australia. Information provided to the chief operating decision maker for the purposes of
making decisions about allocating resources to the segment and assessing its performance is consistent with amounts
presented in the Consolidated Financial Statements. The Group has not restated the corresponding items of segment
information for earlier periods. The Group’s revenues and non-current assets are wholly based in Australia. The Group is
not reliant on any single customer.
As the Group continues to implement its transformation strategy, it will re-evaluate the information provided to the chief
operating decision maker, which may change the Group's operating segments going forward.
Slater and Gordon Limited
38
Page 30
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
1.2.
Adoption of New Accounting Standards
The Company adopted all the new mandatory standards and interpretations for the current reporting period. This
included application of amendments in AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure
Initiative: Amendments to AASB 107, which require disclosure of changes in liabilities arising from financing activities,
see Note 5.2.2. Except for the above amendment, the adoption of these standards and interpretations did not result in a
material change to the reported results and position or disclosures of the Group as they did not result in any changes to
the Group’s existing accounting policies.
1.3.
Significant Accounting Judgements, Estimates and Assumptions
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions
that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to estimates are recognised prospectively.
The significant judgements made by management in applying the Group’s accounting policies and the key sources of
estimation uncertainty are outlined in detail within the specific note to which they relate.
1.4.
Foreign Currency Translations and Balances
Functional and Presentation Currency
The consolidated financial statements are presented in Australian dollars which is also the functional currency of the
parent entity and all Australian subsidiaries. The financial statements of each entity within the consolidated entity are
measured using the currency of the primary economic environment in which that entity operates (the functional
currency).
Transactions and Balances
below.
of the financial year.
Foreign Operations
Transactions in foreign currencies of entities within the consolidated group are translated into the respective functional
currency of each entity at the rate of exchange ruling at the date of the transaction. The assets, liabilities and results of
foreign operations where their functional currency is different to the presentation currency are translated as disclosed
Foreign currency monetary items that are outstanding at the reporting date are translated using the spot rate at the end
Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or re-statement of
monetary items are recognised as income and expenses in profit or loss for the financial year.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions and are not remeasured unless they are carried at fair value.
On consolidation, the assets and liabilities of foreign operations are translated into the presentation currency of the
Group at the closing rate on the reporting date. Income and expenses are translated at average exchange rates for the
period, unless the exchange rate fluctuated significantly during the period, in which case the exchange rates at the dates
of the transactions are used. All resulting exchange differences are recognised in Other Comprehensive Income and
accumulated in the foreign currency translation reserve, a separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
Note 2: Segment Reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other
components.
Following the restructure of the Group completed during the period, the Group has one reportable segment, which
provides legal services in Australia. Information provided to the chief operating decision maker for the purposes of
making decisions about allocating resources to the segment and assessing its performance is consistent with amounts
presented in the Consolidated Financial Statements. The Group has not restated the corresponding items of segment
information for earlier periods. The Group’s revenues and non-current assets are wholly based in Australia. The Group is
not reliant on any single customer.
As the Group continues to implement its transformation strategy, it will re-evaluate the information provided to the chief
operating decision maker, which may change the Group's operating segments going forward.
Note 3: Financial Performance
3.1.
Revenue from Contracts with Customers
3.1.1. Accounting Policies
Provision of Legal Services – Personal Injury Law Claims
The Group early adopted AASB 15 Revenue from Contracts with Customers during the year ended 30 June 2016. The
personal injury law practice operates on the basis of No Win – No Fee conditional fee arrangements, whereby fees are
earned only in the event of a successful outcome of a customer’s claim. In some cases, fees may be fixed, depending on
the stage at which a matter concludes. For some arrangements (primarily in the UK), fees are fixed as a specified
percentage of damages awarded under a claim.
In personal injury matters, contracts with clients generally comprise a single distinct performance obligation, being the
provision of services in pursuit of the successful settlement of a customer’s claim, and the transaction price is allocated
to this single performance obligation. Some contracts contain multiple deliverables – such as legal services in respect of
a statutory claim and a common law claim, or initial pre-issue work and litigation work. In such circumstances, these
multiple deliverables are considered to represent a single distinct performance obligation, given there is a significant
service of integration performed by the Group in delivering these services. Management considers the methods used
provide a faithful depiction of the transfer of goods or services.
The uncertainty around the fees receivable under a contract is generally only resolved when a matter is concluded. In
recognising revenue in the personal injury practice, where the Group has sufficient historical experience in similar
contracts in order to be able to estimate the expected outcome of a group of existing contracts reliably, revenue from the
fees from contracts is estimated using the expected value method base. The estimated amount of variable consideration
is based on the expected fee for the nature of the legal service with reference to historical fee levels and relative rates of
successful and unsuccessful outcomes. To determine the probability of success of a case, a level of judgement is
required to be applied based on past experience and historical performance of similar matters.
Expected fees are only included in revenue to the extent that it is highly probable that the cumulative amount of revenue
recognised in respect of a contract at the end of a reporting period will not be subject to significant reversal when a
matter is concluded.
Where historical averages are not predictive of the probability of outcomes for a given contract, or where the Group has
limited historical experience with similar contracts, the expected amount of variable consideration is estimated using a
most likely amount approach on a contract by contract basis. In such circumstances, a level of judgement is required to
determine the likelihood of success of a given matter, as well as the estimated amount of fees that will be recovered in
respect of the matter.
Revenue is recognised when control of a service is transferred to the customer. The Group recognises revenue in
respect of personal injury matters “over time” (as opposed to at a “point in time”). A stage of completion approach is
used to measure progress towards completion of the performance obligation. The stage of completion is determined
using a milestones based approach using prescribed status codes for client matters as the relevant milestones. The
percentage completion is determined either by calculating the average fee received for matters that resolve at a
particular status code as a percentage of the average fee received for matters that resolve at that status and any later
status, or by use of defined completion allocations based on historical performance.
Estimates of revenues (including interim billing), costs or extent of progress toward completion are revised if
circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss
in the period in which the circumstances that give rise to the revision become known by management.
The Group has determined that no significant financing component exists in respect of the personal injury revenue
streams. This is because in personal injury matters, a substantial amount of the consideration promised by the customer
is variable subject to the occurrence or non-occurrence of a future event that is not substantially within the control of the
customer or the Group.
A receivable in relation to these services is recognised on settlement of the client matter and when a bill has been
invoiced, as this is the point in time that the consideration is unconditional because only the passage of time is required
before the payment is due.
The Company arranges for the disbursement activities on behalf of the client; however it does not control the output
from those activities. The Company cannot influence the content of the medical reports or court filings, therefore no
profit margin is recognised on the activities and the clients are charged the direct cost incurred by the Company. As
such, the Company acts as an agent for disbursements, which are only recognised when it is assessed that a
reimbursement will be received from the client or on his or her behalf. The disbursements are treated as a separate
asset. The amount recognised for the expected reimbursement does not exceed the relevant costs incurred.
The amount of any expected reimbursement is reduced by an allowance for non-recovery based on past experience.
Slater and Gordon Limited
Page 30
Slater and Gordon Limited
Page 31
39
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.1.1 Accounting Policies (continued)
When new businesses are acquired, there is a transition period during which time the Group’s practices and procedures
are embedded into the operations of the new business. Therefore the valuation of work in progress acquired in a
business combination may be adjusted during the period of provisional accounting for the acquisition.
Provision of Legal Services – Litigation and Emerging Services
The Group also earns revenue from provision of general legal services, incorporating project litigation. Revenue for
general legal services is recognised over time in the accounting period when services are rendered.
Fee arrangements from general legal services include fixed fee arrangements, unconditional fee for service
arrangements (“time and materials”), and variable or contingent fee arrangements (including No Win – No Fee
arrangements for services including project litigation, and some consumer and commercial litigation).
For fixed fee arrangements, revenue is recognised based on the stage of completion with reference to the actual
services provided as a proportion of the total services expected to be provided under the contract. The stage of
completion is tracked on a contract by contract basis using a milestone based approach, which was explained above.
In fee for service contracts, revenue is recognised up to the amount of fees that the Group is entitled to invoice for
services performed to date based on contracted rates.
The Group estimates fees for variable or conditional service fee arrangements using a most likely amount approach on
a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be
received and the probability of success of each case. Variable consideration is included in revenue only to the extent
that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved
(generally when a matter is concluded).
Certain project litigation matters are undertaken on a partially funded basis. The Group has arrangements with third
party funders to provide a portion of the fees receivable on a matter over time as services are performed. In such
arrangements, the funded portion of fees is billed regularly over time and is not contingent on the successful outcome
of the litigation. The remaining portion of fees is variable consideration which is conditional on the successful
resolution of the litigation. The variable consideration is included in revenue as services are performed only to the
extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is
resolved.
As in the case of personal injury claims, estimates of revenues, costs or extent of progress toward completion are
revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in
profit or loss in the period in which the circumstances that give rise to the revision become known by management.
The Group has determined that no significant financing component exists in respect of the general law services
revenue streams. This has been determined on fee for service and fixed fee arrangements as the period between
when the entity transfers a promised good or service to a customer and when the customer pays for that good or
service will be one year or less. For No Win - No Fee arrangements this has been determined because a significant
amount of the consideration promised by the customer is variable subject to the occurrence or non-occurrence of a
future event that is not substantially within the control of the customer or the Group.
A receivable in relation to these services is recognised when a bill has been invoiced, as this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is due.
Provision of Other Services – Slater Gordon Solutions (Discontinued Operations)
Legal Services
Revenue from Road Traffic Accidents (“RTA”) and Employer Liability/Public Liability (“EL/PL”) files is recognised over
the life of the case based on prescribed milestones in a matter.
The legal services practice operates on the basis of No Win – No Fee conditional fee arrangements and applies the
same accounting policies as personal injury claims described above. In some cases, fees may be fixed, depending on
the stage at which a matter concludes. For some arrangements, fees are fixed as a specified percentage of damages
awarded under a claim.
Vehicle Hire and Repair
Revenue from the provision of car repair is recognised at a point in time. Revenue from the provision of car hire and
cost recovery services are recognised over the time that the services are performed.
For car repair services, revenue is recognised upon completion of all repair work and upon the customer signing a
“client satisfaction note” in taking back possession of the car. The amount of revenue recognised is the amount as
agreed in writing between the parties prior to the service being provided in the repair contract.
For car hire and cost recovery services, the revenue is recognised over time, being the period between the
commencement of the car hire and settlement of costs through the Third Party Insurer (“TPI”). The amount of revenue
recognised is the amount as agreed in writing between the parties prior to the service being provided in the hire rental
agreement.
Slater and Gordon Limited
40
Page 32
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.1.1 Accounting Policies (continued)
3.1.1 Accounting Policies (continued)
When new businesses are acquired, there is a transition period during which time the Group’s practices and procedures
are embedded into the operations of the new business. Therefore the valuation of work in progress acquired in a
business combination may be adjusted during the period of provisional accounting for the acquisition.
Provision of Legal Services – Litigation and Emerging Services
The Group also earns revenue from provision of general legal services, incorporating project litigation. Revenue for
general legal services is recognised over time in the accounting period when services are rendered.
Fee arrangements from general legal services include fixed fee arrangements, unconditional fee for service
arrangements (“time and materials”), and variable or contingent fee arrangements (including No Win – No Fee
arrangements for services including project litigation, and some consumer and commercial litigation).
For fixed fee arrangements, revenue is recognised based on the stage of completion with reference to the actual
services provided as a proportion of the total services expected to be provided under the contract. The stage of
completion is tracked on a contract by contract basis using a milestone based approach, which was explained above.
In fee for service contracts, revenue is recognised up to the amount of fees that the Group is entitled to invoice for
services performed to date based on contracted rates.
The Group estimates fees for variable or conditional service fee arrangements using a most likely amount approach on
a contract by contract basis. Management makes a detailed assessment of the amount of revenue expected to be
received and the probability of success of each case. Variable consideration is included in revenue only to the extent
that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved
(generally when a matter is concluded).
Certain project litigation matters are undertaken on a partially funded basis. The Group has arrangements with third
party funders to provide a portion of the fees receivable on a matter over time as services are performed. In such
arrangements, the funded portion of fees is billed regularly over time and is not contingent on the successful outcome
of the litigation. The remaining portion of fees is variable consideration which is conditional on the successful
resolution of the litigation. The variable consideration is included in revenue as services are performed only to the
extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is
resolved.
As in the case of personal injury claims, estimates of revenues, costs or extent of progress toward completion are
revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in
profit or loss in the period in which the circumstances that give rise to the revision become known by management.
The Group has determined that no significant financing component exists in respect of the general law services
revenue streams. This has been determined on fee for service and fixed fee arrangements as the period between
when the entity transfers a promised good or service to a customer and when the customer pays for that good or
service will be one year or less. For No Win - No Fee arrangements this has been determined because a significant
amount of the consideration promised by the customer is variable subject to the occurrence or non-occurrence of a
future event that is not substantially within the control of the customer or the Group.
A receivable in relation to these services is recognised when a bill has been invoiced, as this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is due.
Provision of Other Services – Slater Gordon Solutions (Discontinued Operations)
Legal Services
Revenue from Road Traffic Accidents (“RTA”) and Employer Liability/Public Liability (“EL/PL”) files is recognised over
the life of the case based on prescribed milestones in a matter.
The legal services practice operates on the basis of No Win – No Fee conditional fee arrangements and applies the
same accounting policies as personal injury claims described above. In some cases, fees may be fixed, depending on
the stage at which a matter concludes. For some arrangements, fees are fixed as a specified percentage of damages
awarded under a claim.
Vehicle Hire and Repair
Revenue from the provision of car repair is recognised at a point in time. Revenue from the provision of car hire and
cost recovery services are recognised over the time that the services are performed.
For car repair services, revenue is recognised upon completion of all repair work and upon the customer signing a
“client satisfaction note” in taking back possession of the car. The amount of revenue recognised is the amount as
agreed in writing between the parties prior to the service being provided in the repair contract.
For car hire and cost recovery services, the revenue is recognised over time, being the period between the
commencement of the car hire and settlement of costs through the Third Party Insurer (“TPI”). The amount of revenue
recognised is the amount as agreed in writing between the parties prior to the service being provided in the hire rental
agreement.
Slater and Gordon Limited
Work in progress is only included in revenue to the extent that it is highly probable that the cumulative amount of
revenue recognised in respect of a contract at the end of a reporting period will not be subject to significant reversal
when a matter is concluded. A dilution rate is applied on the invoice to recognise the fact that there may be a
settlement adjustment with the insurer if the insurer disputes any costs. This also takes into account the fact that some
cases may not be ‘no fault’.
A receivable in relation to these services is recognised when a bill has been issued, as this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is due.
For car hire and repair services provided for not at fault clients, the Group acts as a principal. Although the services are
provided by third party suppliers, the Group has the primary responsibility to ensure that the services have been
delivered to the clients. The Group cannot vary the prices set by the supplier, as it is governed by an industry
framework and the Group collects the revenue from the customer and bears all credit risk.
Revenue resulting from car hire and repair services within SGS Motor Services is recognised on a gross basis.
Medical Reports and Rehabilitation Services
Revenue from the provision of medical appointments and rehabilitation services is recognised at a point in time.
For medical appointments, the revenue is recognised when the medical report is received from the medical expert. The
amount of revenue recognised is based on the average fee per case calculated on a historic basis. This value remains
in work in progress until the medical report is issued to the Instructing Party (‘IP‘) at which point the sales invoice is
raised.
treatment is completed and the final
For rehabilitation services, the revenue is recognised when the course of
assessment or discharge report is issued to the IP. The amount of revenue recognised is based on the average fee per
case calculated on a historic basis. This value remains in work in progress until the final assessment or discharge
report is issued to the IP at which point the sales invoice is raised.
A receivable in relation to these services is recognised when a bill has been issued, as this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is due.
Contract Costs
Applying the practical expedient in paragraph 94 of AASB 15 Revenue from Contracts with Customers, the Group
recognises the incremental costs of obtaining contracts as an expense when incurred.
Critical Accounting Estimate and Judgements
(i).
Identifying the Performance Obligation
In personal injury matters, contracts with clients generally comprise a single distinct performance obligation, being the
provision of services in pursuit of the successful settlement of a customer’s claim, and the transaction price is allocated
to this single performance obligation. Some contracts contain multiple deliverables – such as legal services in respect of
a statutory claim and a common law claim, or initial pre-issue work and litigation work. In such circumstances, these
multiple deliverables are considered to represent a single distinct performance obligation, given there is a significant
service of integration performed by the Group in delivering these services. Management considers the methods used
provide a faithful depiction of the transfer of goods or services.
The Group has some contractual arrangements outside of personal injury matters that include multiple performance
obligations. In these transactions, the transaction price must be allocated to the performance obligations on a relative
stand-alone selling price basis. In most cases, the price for each separate performance obligation is identified in the
contract and in most cases, these prices are considered to be reflective of the stand-alone selling price of each
performance obligation.
The Group notes that it is not practicable to determine and track on a case-by-case basis the elements of a transaction
that should be attributed to pre- and post-acquisition performance, given the nature of the estimates of variable
consideration, and the methodology adopted (based around actual historical average fees and estimates of success
rates on a cohort-by-cohort rather than case-by-case basis).
(ii).
Estimating the Transaction Price: Variable Consideration – No Win – No Fee Arrangements
The Group provides various services on the basis of No Win – No Fee conditional fee arrangements. The uncertainty
around the fees ultimately receivable under these types of contracts is generally only fully resolved when a matter is
concluded.
Where the Group has sufficient historical experience in similar contracts in order to be able to estimate the expected
outcome of a group of existing contracts reliably, revenue is estimated using the expected value method. Fees are only
included in revenue to the extent that it is highly probable that the cumulative amount of revenue recognised in respect of
a contract at the end of a reporting period will not be subject to significant reversal when a matter is concluded.
Page 32
Slater and Gordon Limited
Page 33
41
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.1.1 Accounting Policies (continued)
To determine the probability of success of a case using the expected value method, a level of judgement is required to
be applied based on past experience and historical performance of similar matters. The estimated amount of variable
consideration is based on the expected fee for the nature of the legal service provided with reference to internal historical
fee levels and relative rates of successful and unsuccessful outcomes.
Where historical averages are not predictive of the probability of outcomes for a given contract, or where the Group has
limited historical experience with similar contracts, the expected amount of variable consideration is estimated using a
most likely amount approach on a contract by contract basis. In such circumstances, a level of judgement is required to
determine the likelihood of success of a given matter, as well as the estimated amount of fees that will be recovered in
respect of the matter.
In addition, when new businesses are acquired, there is a transition period during which time the Group’s practices and
procedures are embedded into the operations of the new business. Therefore the valuation of work in progress acquired
in a business combination may be adjusted during the period of provisional accounting for the acquisition.
(iii). Measuring the Stage of Completion
Revenue is recognised when control of a service is transferred to the customer. The Group recognises revenue in
respect of personal injury matters “over time” (as opposed to at a “point in time”). A stage of completion approach is
used to measure progress towards completion of the performance obligation. The stage of completion is determined
using a milestones based approach using prescribed status codes for client matters as the relevant milestones. The
percentage of completion is determined either by calculating the average fee received for matters that resolve at a
particular status code as a percentage of the average fee received for matters that resolve at that status and any later
status, or by use of defined completion allocations based on historical performance.
3.1.2. Disaggregation of Revenue from Contracts with Customers
The Group derives revenue from the transfer of goods and services over time and at a point in time, in the major
product lines of Personal Injury Law and Litigation and Emerging Services and the geographical regions of Australia:
Year ended 30 June 2018
Type of contract:
Fixed price
Time and Materials
No Win – No Fee
Revenue from contracts with
customers
Year ended 30 June 2017 Restated
Type of contract:
Fixed price
Time and Materials
No Win – No Fee
Revenue from contracts with
customers
Personal Injury
Law
$’000
Litigation and
Emerging Services
$’000
-
-
150,831
150,831
-
-
147,832
147,832
664
8,327
(572)
8,419
433
17,066
16,142
33,641
Total
$’000
664
8,327
150,259
159,250
433
17,066
163,974
181,473
Slater and Gordon Limited
42
Page 34
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.1.1 Accounting Policies (continued)
To determine the probability of success of a case using the expected value method, a level of judgement is required to
be applied based on past experience and historical performance of similar matters. The estimated amount of variable
consideration is based on the expected fee for the nature of the legal service provided with reference to internal historical
fee levels and relative rates of successful and unsuccessful outcomes.
Where historical averages are not predictive of the probability of outcomes for a given contract, or where the Group has
limited historical experience with similar contracts, the expected amount of variable consideration is estimated using a
most likely amount approach on a contract by contract basis. In such circumstances, a level of judgement is required to
determine the likelihood of success of a given matter, as well as the estimated amount of fees that will be recovered in
respect of the matter.
In addition, when new businesses are acquired, there is a transition period during which time the Group’s practices and
procedures are embedded into the operations of the new business. Therefore the valuation of work in progress acquired
in a business combination may be adjusted during the period of provisional accounting for the acquisition.
(iii). Measuring the Stage of Completion
Revenue is recognised when control of a service is transferred to the customer. The Group recognises revenue in
respect of personal injury matters “over time” (as opposed to at a “point in time”). A stage of completion approach is
used to measure progress towards completion of the performance obligation. The stage of completion is determined
using a milestones based approach using prescribed status codes for client matters as the relevant milestones. The
percentage of completion is determined either by calculating the average fee received for matters that resolve at a
particular status code as a percentage of the average fee received for matters that resolve at that status and any later
status, or by use of defined completion allocations based on historical performance.
3.1.2. Disaggregation of Revenue from Contracts with Customers
The Group derives revenue from the transfer of goods and services over time and at a point in time, in the major
product lines of Personal Injury Law and Litigation and Emerging Services and the geographical regions of Australia:
Year ended 30 June 2018
Type of contract:
Fixed price
Time and Materials
No Win – No Fee
Revenue from contracts with
customers
Year ended 30 June 2017 Restated
Type of contract:
Fixed price
Time and Materials
No Win – No Fee
Revenue from contracts with
customers
Personal Injury
Law
$’000
Litigation and
Emerging Services
$’000
-
-
-
-
150,831
150,831
147,832
147,832
664
8,327
(572)
8,419
433
17,066
16,142
33,641
Total
$’000
664
8,327
150,259
159,250
433
17,066
163,974
181,473
3.2.
Expenses
3.2.1. Accounting Policies
Interest
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or
premium on settlement.
Depreciation
The depreciable amounts of all property, plant and equipment, excluding land, are depreciated over their estimated
useful lives, commencing from the time the asset is held ready for use. Leased assets are depreciated over the shorter of
the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the
lease term. Land is not depreciated.
The depreciation rates used for each class of assets are:
Class of Fixed Asset
Plant and equipment
Low value asset pool
Amortisation
Depreciation Rates
Depreciation Method
5.00 – 66.67%
18.75 – 37.50%
Straight Line and Diminishing Value
Diminishing Value
Amortisation is calculated using a straight-line method to allocate the cost of intangible assets over their estimated useful
lives. Amortisation commences when the intangible asset is available for use.
Software development costs have been assessed as having a finite useful life and once operating in the Group are
amortised over the useful life of 3 years. Trademarks, prior to their full impairment during the prior year, that have been
assessed as having a finite useful life were amortised over the useful life of 3 years.
Share Based Payments
The accounting policy for share based payments is included in Note 5.6.
3.2.2. Expense Analysis by Nature
Finance costs expense
Interest and fees on bank overdraft and loans (includes costs of borrowing)
Interest on deferred consideration payable to vendor on acquisitions
Interest on onerous leases
Interest on obligations under hire purchases
Salaries and employee benefit expense
Wages and salaries
Post-employment benefits
Redundancy costs
Share based payments expense
Depreciation and Amortisation
Property, plant & equipment
Software development
Trademarks
2018
$’000
15,941
5
109
316
16,371
87,410
7,044
2,636
(42)
97,048
3,687
23
-
3,710
Restated(1)
2017
$’000
18,878
96
-
404
19,378
107,306
8,551
-
1,096
116,953
3,720
1,567
201
5,488
Slater and Gordon Limited
Page 34
Slater and Gordon Limited
Page 35
43
(1) The prior year comparative has been restated in accordance with the requirements of the Australian Accounting Standards as a result of the discontinued operations.
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.3.
Cash Flow Information
Reconciliation of profit for the period to cash flows from operating activities
Profit / (loss) after income tax
Non-cash flows in profit from ordinary activities
Notional interest on VCR share loans
Depreciation and amortisation
Impairment of intangibles
Share based payment expenses
Accrual for payments to former owners
Notional interest on deferred consideration
Bad and doubtful debts
Non-cash net gain on disposal of discontinued operations
Deferred costs of borrowing
Notional FX (gain) / loss
Interest Rate Swap Expense
Interest Expense Capitalised
Other non-cash items
Items shown in investing activities
Costs associated with the Scheme
Costs associated with acquisition
Proceeds from disposal of businesses
Changes in assets and liabilities
Decrease / (increase) in receivables
Decrease / (increase) in other assets
Decrease in work in progress
(Decrease) in payables
Decrease / (increase) in income tax payable
(Decrease) / increase in net deferred tax
(Decrease) in derivatives
(Decrease) in other liabilities
(Decrease) in vendor liabilities
Increase / (decrease) in provisions
Cash flows used in operating activities
2018
$’000
113,730
-
6,386
-
2,182
-
-
11,612
(197,093)
-
(1,402)
-
29,958
-
5,515
-
-
32,717
5,182
20,001
(30,033)
(2,108)
(17,285)
(1,677)
(1,840)
-
(24,087)
(48,242)
2017
$’000
(546,831)
(859)
11,228
361,265
7,720
4,453
96
47,885
-
12,313
(1,354)
566
31,404
(3,106)
-
3
(3)
(2,234)
3,511
52,323
(33,944)
15,435
(1,183)
-
-
(189)
2,413
(39,088)
Slater and Gordon Limited
44
Page 36
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.3.
Cash Flow Information
Reconciliation of profit for the period to cash flows from operating activities
Profit / (loss) after income tax
Non-cash flows in profit from ordinary activities
Notional interest on VCR share loans
Depreciation and amortisation
Impairment of intangibles
Share based payment expenses
Accrual for payments to former owners
Notional interest on deferred consideration
Bad and doubtful debts
Non-cash net gain on disposal of discontinued operations
Deferred costs of borrowing
Notional FX (gain) / loss
Interest Rate Swap Expense
Interest Expense Capitalised
Other non-cash items
Items shown in investing activities
Costs associated with the Scheme
Costs associated with acquisition
Proceeds from disposal of businesses
Changes in assets and liabilities
Decrease / (increase) in receivables
Decrease / (increase) in other assets
Decrease in work in progress
(Decrease) in payables
Decrease / (increase) in income tax payable
(Decrease) / increase in net deferred tax
(Decrease) in derivatives
(Decrease) in other liabilities
(Decrease) in vendor liabilities
Increase / (decrease) in provisions
Cash flows used in operating activities
113,730
(546,831)
2018
$’000
6,386
2,182
-
-
-
-
-
-
-
-
-
-
11,612
(197,093)
(1,402)
29,958
5,515
32,717
5,182
20,001
(30,033)
(2,108)
(17,285)
(1,677)
(1,840)
(24,087)
(48,242)
2017
$’000
(859)
11,228
361,265
7,720
4,453
96
47,885
-
12,313
(1,354)
566
31,404
(3,106)
-
3
(3)
(2,234)
3,511
52,323
(33,944)
15,435
(1,183)
-
-
(189)
2,413
(39,088)
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.4.
Income and Other Taxes
3.4.1. Accounting Policies
Income and other taxes consist of income tax, Goods and Services Tax and Value Added Tax.
Current income tax expense or benefit for the current and prior periods is measured at the amount expected to be
recovered from or paid to the tax authorities. The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the countries where the Group operates.
Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets
are expected to be recovered or liabilities are settled. Deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred tax is also not accounted for if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination, and at the time of the transaction affects neither accounting
nor taxable profit or loss.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realised. Unrecognised deferred tax assets are reassessed at each reporting date and
recognised to the extent that it has become probable that future taxable profits will be available against which they can
be used.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at
the reporting date.
Current and deferred tax for the year are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises
from the initial accounting for a business combination, the tax effect is included in the accounting for the business
combination.
Critical Accounting Estimates and Judgements
Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in the income tax
legislation both in Australia and the UK and the anticipation that the Group will derive sufficient future assessable income
to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
Deferred tax assets are recognised only if management considers it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Goods and Services Tax (“GST”) and Value Added Tax (“VAT”)
Revenue, expenses and assets are recognised net of the amount of GST/VAT, except where the GST/VAT incurred is
not recoverable from the Australian Taxation Office (“ATO”), UK Her Majesty’s Revenue and Customs (“HMRC”) or Malta
Inland Revenue (“MIR”) and is therefore recognised as part of the asset’s cost or as part of the expense item.
Receivables and payables are stated inclusive of GST/VAT.
The net amount of GST/VAT recoverable from, or payable to, the ATO/HMRC/MIR is included as part of receivables or
payables in the consolidated statement of financial position.
3.4.2.
Income Tax Expense
The major components of income tax expense are:
Consolidated statement of profit or loss and other comprehensive income – profit
or loss
Current income tax (benefit) / expense
Adjustment for current tax (benefit) / expense relating to prior periods
Deferred income tax (benefit) / expense relating to the origination and reversal of
temporary differences
Income tax (benefit)
Consolidated statement of profit or loss and other comprehensive income – OCI
Deferred tax credit arising on revaluation of cash flow hedges
Deferred tax credit arising on foreign exchange gain on revaluation of loans
Income tax recognised directly in equity
Current tax credit on share issue costs
Slater and Gordon Limited
Page 36
Slater and Gordon Limited
2018
$’000
1,226
(402)
(17,260)
(16,436)
-
-
-
-
-
2017
$’000
3,636
364
(8,318)
(4,318)
266
105
371
-
-
Page 37
45
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.4.2.
Income Tax Expense (continued)
Deferred income tax (benefit) /expense included in income tax expense:
(Increase)/decrease in deferred tax assets
Deferred income tax credit relating to items charged to OCI
(Decrease) in deferred tax liabilities
Change in tax rates
Deferred tax (benefit) / expense from prior periods
Derecognition of deferred tax asset on tax losses
(Derecognition) of deferred tax liability on impairment of brand names
The prima facie tax payable on profit before tax differs from the income tax expense
as follows:
Accounting (loss) before tax of continuing operations
Profit/(loss) before tax of discontinued operations
Total accounting profit / (loss) before tax
At the Australian statutory income tax rate of 30% (2017: 30%)
Non-deductible expenses
Non-assessable income
Adjustments in respect to prior periods
Difference in overseas tax rate
Utilisation of tax losses and reversal of short term timing differences on which no deferred
tax asset was previously recognised
Deferred tax charged at lower rate
Change in tax rates on deferred tax balances
Write off of deferred tax liability on impairment of brand names
Deferred tax assets not recognised
Tax benefit on scheme transaction
Group relief (claimed)/surrendered
Income tax (benefit)
3.4.3. Recognised Tax Assets and Liabilities
Current tax assets
Balance at the beginning of the year
Tax refunded
Adjustments in respect to prior periods
Disposal of UK operations
Exchange differences
Balance at the end of the year
2018
$’000
2017
$’000
(5,831)
-
(10,526)
-
(903)
-
-
(17,260)
(29,238)
126,532
97,294
29,188
148,126
(136,147)
(1,305)
(66,655)
(305)
-
-
-
17,503
(7,428)
587
(16,436)
(15,483)
(371)
(9,836)
(945)
882
25,362
(7,927)
(8,318)
(96,269)
(454,880)
(551,149)
(165,344)
74,929
(872)
1,246
45,508
2,833
1,156
(945)
(7,927)
45,098
-
-
(4,318)
2018
$’000
2017
$’000
3
-
-
(3)
-
-
16,803
(16,138)
(2)
-
(660)
3
Slater and Gordon Limited
46
Page 38
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.4.2.
Income Tax Expense (continued)
3.4.3. Recognised Tax Assets and Liabilities (continued)
Deferred income tax (benefit) /expense included in income tax expense:
(Increase)/decrease in deferred tax assets
Deferred income tax credit relating to items charged to OCI
(Decrease) in deferred tax liabilities
Change in tax rates
Deferred tax (benefit) / expense from prior periods
Derecognition of deferred tax asset on tax losses
(Derecognition) of deferred tax liability on impairment of brand names
The prima facie tax payable on profit before tax differs from the income tax expense
as follows:
Accounting (loss) before tax of continuing operations
Profit/(loss) before tax of discontinued operations
Total accounting profit / (loss) before tax
At the Australian statutory income tax rate of 30% (2017: 30%)
Utilisation of tax losses and reversal of short term timing differences on which no deferred
Non-deductible expenses
Non-assessable income
Adjustments in respect to prior periods
Difference in overseas tax rate
tax asset was previously recognised
Deferred tax charged at lower rate
Change in tax rates on deferred tax balances
Write off of deferred tax liability on impairment of brand names
Deferred tax assets not recognised
Tax benefit on scheme transaction
Group relief (claimed)/surrendered
Income tax (benefit)
3.4.3. Recognised Tax Assets and Liabilities
Current tax assets
Balance at the beginning of the year
Tax refunded
Adjustments in respect to prior periods
Disposal of UK operations
Exchange differences
Balance at the end of the year
2018
$’000
(5,831)
(10,526)
(903)
(17,260)
(29,238)
126,532
97,294
29,188
148,126
(136,147)
(1,305)
(66,655)
(305)
-
-
-
-
-
-
-
17,503
(7,428)
587
2017
$’000
(15,483)
(371)
(9,836)
(945)
882
25,362
(7,927)
(8,318)
(96,269)
(454,880)
(551,149)
(165,344)
74,929
(872)
1,246
45,508
2,833
1,156
(945)
(7,927)
45,098
-
-
(16,436)
(4,318)
2018
$’000
2017
$’000
3
-
-
-
-
(3)
16,803
(16,138)
(2)
-
3
(660)
Current tax liability
Balance at the beginning of the year
Current income tax benefit/(expense)
Tax paid
Adjustments in respect of prior periods
Disposal of UK operations
Balance at the end of the year
Deferred tax assets
Provision for impairment
Employee benefits
Provision for legal costs
Accruals
Non-deducted business related costs
Fair value of cash flow hedges
Unrendered WIP and disbursements not yet deducted
Other
Property, plant and equipment
Revenue losses carried forward
Advanced Company Income Tax (“ACIT”) refund in Malta
Total
Transfer deferred tax assets balance to deferred tax liabilities
Balance at the end of the year
Deferred tax liabilities
Prepayments
Work in progress
Unrendered disbursements
Intangibles/Goodwill
Foreign currency translation reserve
Other
Total
Transfer of deferred tax assets balance
Net deferred tax liability balance at the end of the year
3.4.4. Unrecognised Deferred Tax Assets
2018
$’000
(8,250)
-
-
-
8,250
-
2018
$’000
5,747
5,360
1,276
4,176
3,508
-
7,428
2,812
2,459
-
-
2017
$’000
(9,301)
(3,636)
5,051
(364)
-
(8,250)
2017
$’000
5,532
6,828
896
9,818
487
256
-
1,282
2,630
696
6,293
32,766
(32,766)
34,718
-
-
34,718
(371)
(67,778)
(13,458)
(755)
-
65
(82,297)
32,766
(49,531)
(971)
(72,227)
(13,689)
-
(6,529)
55
(93,361)
-
(93,361)
Slater and Gordon Limited
Page 38
Slater and Gordon Limited
Franking credits available
Franking credits at year end are adjusted for credits arising from payment of
provision for income tax and after deducting franking credits to be used in payment
of proposed dividends:
2018
$’000
2017
$’000
-
-
Page 39
47
At 30 June 2018 the Group has unrecognised deferred tax assets of $104.9m (2017: $160.8m) relating to unrecognised
tax losses.
3.5.
Dividends
No interim or final dividend was paid, declared or proposed for the years ended 30 June 2018 or 30 June 2017.
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.6.
Earnings / (loss) per Share
The following reflects the loss and share data used in the calculations of basic and diluted loss per share:
(Loss) used in calculating basic and diluted earnings / (loss) per share from
continuing operations
Gain / (loss) used in calculating basic and diluted earnings / (loss) per share
from discontinued operations
Weighted average number of ordinary shares used in calculating basic
earnings / (loss) per share (‘000’s)
Adjusted weighted average number of ordinary shares used in calculating
diluted earnings / (loss) per share (‘000’s)
2018
$’000
2017
$’000
(31,916)
(74,459)
145,642
(472,090)
37,859
37,859
3,517
3,517
On 8 December 2017, the Company undertook a share consolidation of 1 ordinary share for every 100 on issue (refer
Note 5.5). The number of shares used in calculating basic and diluted earnings / (loss) per share has been adjusted
retrospectively for the periods presented.
Note 4: Assets and Liabilities
This section shows the assets used to generate the Group’s revenue and the liabilities incurred as a result. Liabilities
relating to the Group’s financing activities are disclosed in Note 5. Deferred tax assets and liabilities are disclosed in Note
3.4.
On the following pages there are notes covering intangible assets, working capital, work in progress, other non-current
assets, payables and provisions.
4.1.
Intangible Assets
4.1.1. Accounting Policies
Goodwill
Goodwill was initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired
and liabilities assumed.
Goodwill was not amortised, but was tested annually for impairment or more frequently if events or changes in
circumstances indicated that it might be impaired. Prior to being fully impaired in the prior year, goodwill was carried at
cost less any accumulated impairment losses.
Software Development Costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development costs are capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the entity is able to use or sell the asset; the entity has sufficient resources and intent to complete
the development and its costs can be measured reliably. Capitalised development expenditure is stated at cost less
accumulated amortisation and accumulated impairment losses.
Slater and Gordon Limited
48
Page 40
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
3.6.
Earnings / (loss) per Share
The following reflects the loss and share data used in the calculations of basic and diluted loss per share:
4.1.1 Accounting Policies (continued)
Trademarks and Brand Names
(Loss) used in calculating basic and diluted earnings / (loss) per share from
continuing operations
Gain / (loss) used in calculating basic and diluted earnings / (loss) per share
from discontinued operations
Weighted average number of ordinary shares used in calculating basic
earnings / (loss) per share (‘000’s)
Adjusted weighted average number of ordinary shares used in calculating
diluted earnings / (loss) per share (‘000’s)
2018
$’000
2017
$’000
(31,916)
(74,459)
145,642
(472,090)
37,859
37,859
3,517
3,517
On 8 December 2017, the Company undertook a share consolidation of 1 ordinary share for every 100 on issue (refer
Note 5.5). The number of shares used in calculating basic and diluted earnings / (loss) per share has been adjusted
retrospectively for the periods presented.
Note 4: Assets and Liabilities
This section shows the assets used to generate the Group’s revenue and the liabilities incurred as a result. Liabilities
relating to the Group’s financing activities are disclosed in Note 5. Deferred tax assets and liabilities are disclosed in Note
On the following pages there are notes covering intangible assets, working capital, work in progress, other non-current
3.4.
assets, payables and provisions.
4.1.
Intangible Assets
4.1.1. Accounting Policies
Goodwill
and liabilities assumed.
Goodwill was initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired
Goodwill was not amortised, but was tested annually for impairment or more frequently if events or changes in
circumstances indicated that it might be impaired. Prior to being fully impaired in the prior year, goodwill was carried at
cost less any accumulated impairment losses.
Software Development Costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Development costs are capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the entity is able to use or sell the asset; the entity has sufficient resources and intent to complete
the development and its costs can be measured reliably. Capitalised development expenditure is stated at cost less
accumulated amortisation and accumulated impairment losses.
Trademarks acquired in a business combination and recognised separately from goodwill were initially recognised at
their fair value at the acquisition date (which is regarded as their cost). The fair value of trademarks was based on the
discounted estimated royalty payments that have been avoided as a result of the trademark being owned.
Prior to their full impairment in the prior year, trademarks were carried at cost less accumulated amortisation and any
accumulated impairment losses.
Gross Cost
Accumulated amortisation
Accumulated impairment loss
At 30 June 2017
Gross Cost
Accumulated amortisation
Accumulated impairment loss
At 30 June 2018
Movement in carrying amounts
Balance at 1 July 2016
Additions
Reclassifications from property, plant and
equipment
Exchange differences
Amortisation expense
Impairment expense
Disposals
Balance at 30 June 2017
Disposal of UK operations
Additions
Reclassifications from property, plant and
equipment
Exchange differences
Amortisation expense
Impairment expense
Disposals
Balance at 30 June 2018
Software
Development
$’000
41,605
(23,427)
(5,066)
Trademarks
& Brand
Names
$’000
53,452
(12,199)
(41,253)
Assets in
Course of
Construction
$’000
-
-
-
Total
$’000
1,214,656
(35,626)
(1,165,918)
Goodwill
$’000
1,119,599
-
(1,119,599)
-
-
-
-
-
332,868
-
-
(17,922)
-
(314,946)
-
-
-
-
-
-
-
-
-
-
13,112
13,160
(7,839)
(5,066)
255
17,409
5,959
(52)
(790)
(4,068)
(5,066)
(280)
13,112
(12,186)
278
-
382
(1,331)
-
-
255
-
-
-
-
-
43,693
-
-
(2,313)
(127)
(41,253)
-
-
-
-
-
-
-
-
-
-
-
13,112
542
-
-
542
13,702
(7,839)
(5,066)
797
-
-
-
-
-
-
-
-
393,970
5,959
(52)
(21,025)
(4,195)
(361,265)
(280)
13,112
-
542
(12,186)
820
-
-
-
-
-
542
-
382
(1,331)
-
-
797
4.1.2.
Impairment Testing of Goodwill and Indefinite Life Intangible Assets
For the purposes of impairment testing, assets are grouped at the lowest levels for which there are separately
identifiable, largely independent cash inflows (cash generating units “CGU’s”). All goodwill and indefinite life intangible
assets were fully impaired in the prior year.
Impairment testing is completed at least annually for goodwill, intangible assets not yet ready for use and indefinite life
intangible assets or more frequently if events or changes in circumstances indicate that the asset may be impaired.
Slater and Gordon Limited
Page 40
Slater and Gordon Limited
Page 41
49
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.1.2 Impairment Testing of Goodwill and Indefinite Life Intangible Assets (continued)
An impairment loss is recognised where the carrying amount of the asset or CGU exceeds its recoverable amount. The
recoverable amount of an asset or CGU is defined as the higher of its fair value less costs of disposal and value-in-use.
Critical Accounting Estimates and Judgements
Determining whether goodwill is impaired requires an estimation of the value-in-use of the CGU’s to which goodwill has
been allocated. The value-in-use calculation requires management to estimate the future cash flows expected to arise
from the CGU and a post-tax discount rate that reflects the current market assessments of the time value of money and
the risks specific to the asset in order to calculate present value. Where the actual future cash flows are less than
expected, a material impairment loss may arise.
4.1.3.
Impairment Losses Recognised
As at 30 June 2018, the Group did not recognise an impairment expense (2017: $10,959,000).
4.2.
Receivables
4.2.1. Accounting Policies
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. If collection of the amounts is expected in one year or less they are classified as current assets. If
not, they are presented as non-current assets.
Collectability of trade debtors is reviewed at each reporting period. Management considers whether further impairment of
debtors is required based on the ageing profile and use calculated historical rates of recovery to determine the required
impairment. Debts that are known to be uncollectible are written off when identified.
Disbursements are only recognised when it is assessed that a reimbursement will be received from the client or on his or
her behalf. The disbursements are treated as a separate asset. The amount recognised for the expected reimbursement
does not exceed the relevant costs incurred. The amount of any expected reimbursement is reduced by an allowance for
non-recovery based on past experience.
Current
Trade receivables
Impairment of trade receivables
Disbursements
Allowance for non-recovery
Other receivables
Non-current
Disbursements
Allowance for non-recovery
Impairment of receivables
Balance at beginning of the year
Receivables written off as uncollectible
Provision for impairment recognised
Release of provisions
Movement in provision for discount
Disposal of UK operations
Foreign exchange translation differences
Balance at end of the year
Slater and Gordon Limited
50
2018
$’000
49,078
(9,749)
39,329
31,473
(3,025)
28,448
2,721
70,498
28,510
(12,099)
16,411
(69,437)
9,125
(9,053)
-
-
59,616
-
(9,749)
2017
$’000
226,412
(69,437)
156,975
301,291
(65,694)
235,597
2,894
395,466
119,847
(28,355)
91,492
(92,824)
29,647
(7,114)
4,853
(9,126)
-
5,127
(69,437)
Page 42
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.1.2 Impairment Testing of Goodwill and Indefinite Life Intangible Assets (continued)
4.2.1. Accounting Policies (continued)
An impairment loss is recognised where the carrying amount of the asset or CGU exceeds its recoverable amount. The
recoverable amount of an asset or CGU is defined as the higher of its fair value less costs of disposal and value-in-use.
As at 30 June, the ageing analysis of trade receivables is as follows:
Past due but not impaired
2018
2017(1)
Total
39,329
61,796
<30 days
30-60 days
61-90 days
91-180 days
>180 days
20,513
42,840
5,697
4,910
2,506
2,712
2,874
5,036
7,739
6,298
(1) 30 June 2017 was restated to only include Australia portion of the ageing of trade receivables past due but not impaired. Due to the divestment of the UK operations as part of the
Recapitalisation, prior year comparatives have been amended to provide for better comparability.
See Note 5.4.4 regarding credit risk of trade receivables, which explains how the Group manages and measures credit
quality of trade receivables.
4.3. Work in Progress
4.3.1. Accounting Policies
Work in progress represents client cases which have not yet reached a conclusion and comprises personal injury cases,
services performed ancillary to personal injury cases, non-personal injury cases and project litigation cases. Refer to
Note 3.1 for further details.
Contracts for legal services are billed based on time incurred. As permitted under AASB 15 Revenue from Contracts with
Customers, the transaction price allocated to the unsatisfied or partially unsatisfied performance obligations under these
contracts has not been disclosed.
The Group allocates work in progress between current and non-current classifications based on a historical analysis of
the Group’s work in progress balances and velocity rates to determine expected timing of settlements.
Current
Personal injury
Litigation and emerging services
Non-current
Personal injury
Litigation and emerging services
2018
$’000
2017
$’000
98,104
12,660
110,764
114,760
269
115,029
268,424
26,447
294,871
219,855
239
220,094
Critical Accounting Estimates and Judgements
Determining whether goodwill is impaired requires an estimation of the value-in-use of the CGU’s to which goodwill has
been allocated. The value-in-use calculation requires management to estimate the future cash flows expected to arise
from the CGU and a post-tax discount rate that reflects the current market assessments of the time value of money and
the risks specific to the asset in order to calculate present value. Where the actual future cash flows are less than
As at 30 June 2018, the Group did not recognise an impairment expense (2017: $10,959,000).
expected, a material impairment loss may arise.
4.1.3.
Impairment Losses Recognised
4.2.
Receivables
4.2.1. Accounting Policies
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. If collection of the amounts is expected in one year or less they are classified as current assets. If
not, they are presented as non-current assets.
Collectability of trade debtors is reviewed at each reporting period. Management considers whether further impairment of
debtors is required based on the ageing profile and use calculated historical rates of recovery to determine the required
impairment. Debts that are known to be uncollectible are written off when identified.
Disbursements are only recognised when it is assessed that a reimbursement will be received from the client or on his or
her behalf. The disbursements are treated as a separate asset. The amount recognised for the expected reimbursement
does not exceed the relevant costs incurred. The amount of any expected reimbursement is reduced by an allowance for
non-recovery based on past experience.
Current
Trade receivables
Impairment of trade receivables
Disbursements
Allowance for non-recovery
Other receivables
Non-current
Disbursements
Allowance for non-recovery
Impairment of receivables
Balance at beginning of the year
Receivables written off as uncollectible
Provision for impairment recognised
Release of provisions
Movement in provision for discount
Disposal of UK operations
Foreign exchange translation differences
Balance at end of the year
2018
$’000
49,078
(9,749)
39,329
31,473
(3,025)
28,448
2,721
70,498
28,510
(12,099)
16,411
9,125
(9,053)
59,616
-
-
-
2017
$’000
226,412
(69,437)
156,975
301,291
(65,694)
235,597
2,894
395,466
119,847
(28,355)
91,492
29,647
(7,114)
4,853
(9,126)
-
5,127
(69,437)
(92,824)
(9,749)
(69,437)
Slater and Gordon Limited
Page 42
Slater and Gordon Limited
Page 43
51
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.4.
Property, Plant and Equipment
4.4.1. Accounting Policies
Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment
losses.
An asset’s residual value and useful life is reviewed, and adjusted if appropriate, at the end of each reporting period. Any
depreciation and impairment losses of an asset are recognised in profit or loss.
Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses
are included in profit or loss when the asset is derecognised.
Gross Cost
Less accumulated depreciation
At 30 June 2017
Gross Cost
Less accumulated depreciation
At 30 June 2018
Movement in carrying amounts
Balance at 1 July 2016
Additions
Exchange differences
Depreciation expense
Disposals
Balance at 30 June 2017
Additions
Exchange differences
Depreciation expense
Disposals
Disposal of UK Operations
Balance at 30 June 2018
Plant &
Equipment
$’000
Land &
Buildings
$’000
Low Value
Asset Pool
$’000
77,624
(51,903)
25,721
31,462
(22,731)
8,731
32,172
1,858
(920)
(6,730)
(659)
25,721
3,985
515
(5,208)
(431)
(15,851)
8,731
249
-
249
-
-
-
265
-
(16)
-
-
249
-
8
-
-
(257)
-
2,995
(2,410)
585
2,763
(2,122)
641
770
139
-
(303)
(21)
585
365
-
(248)
(61)
-
641
Total
$’000
80,868
(54,313)
26,555
34,225
(24,853)
9,372
33,207
1,997
(936)
(7,033)
(680)
26,555
4,350
523
(5,456)
(492)
(16,108)
9,372
The carrying amount of plant and equipment under finance lease included above amounted to $1,000 (30 June 2017:
$4,533,000).
Slater and Gordon Limited
52
Page 44
Slater & Gordon Limited Annual Report 2018
Gross Cost
Less accumulated depreciation
At 30 June 2017
Gross Cost
Less accumulated depreciation
At 30 June 2018
Movement in carrying amounts
Balance at 1 July 2016
Additions
Exchange differences
Depreciation expense
Disposals
Balance at 30 June 2017
Additions
Exchange differences
Depreciation expense
Disposals
Disposal of UK Operations
Balance at 30 June 2018
$4,533,000).
$’000
77,624
(51,903)
25,721
31,462
(22,731)
8,731
32,172
1,858
(920)
(6,730)
(659)
25,721
3,985
515
(5,208)
(431)
(15,851)
8,731
$’000
249
249
-
-
-
-
-
-
-
-
8
-
-
-
265
(16)
249
(257)
$’000
2,995
(2,410)
585
2,763
(2,122)
641
770
139
-
(303)
(21)
585
365
(248)
(61)
-
-
641
Total
$’000
80,868
(54,313)
26,555
34,225
(24,853)
9,372
33,207
1,997
(936)
(7,033)
(680)
26,555
4,350
523
(5,456)
(492)
(16,108)
9,372
The carrying amount of plant and equipment under finance lease included above amounted to $1,000 (30 June 2017:
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.4.
Property, Plant and Equipment
4.4.1. Accounting Policies
losses.
Property, plant and equipment is measured at cost less accumulated depreciation and any accumulated impairment
An asset’s residual value and useful life is reviewed, and adjusted if appropriate, at the end of each reporting period. Any
depreciation and impairment losses of an asset are recognised in profit or loss.
Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses
are included in profit or loss when the asset is derecognised.
Plant &
Land &
Equipment
Buildings
Low Value
Asset Pool
4.5.
Payables
4.5.1. Accounting Policies
Trade creditors and accruals are carried at amortised cost and represent liabilities for goods and services provided to the
Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.
Legal creditors are carried at amortised cost and represent liabilities in relation to disbursements where there is an
agreement with the vendor that payment will not be made by the Group, until the Group has received payment from any
settlement proceeds on the matter.
Vendor liabilities are carried at net present value and refer to deferred consideration payable to vendors in relation to
previous acquisitions.
Current
Unsecured liabilities
Trade creditors and accruals
Legal creditors
Vendor liabilities – acquisitions
4.6.
Provisions
4.6.1. Accounting Policies
2018
$’000
22,422
29,541
128
52,091
2017
$’000
150,026
268,009
584
418,619
Non-employee provisions are recognised when the Group has a present obligation (legal or constructive) as a result of
past events, for which it is probable that an outflow of economic benefits will result in an amount that can be reliably
measured.
Solicitor Liability Claims – Critical Accounting Estimates and Judgements
A provision for solicitor liability claims is made for the potential future cost of claims brought against the Group by former
clients. The provision relates to open claims and potential future claims as identified at the end of the reporting period.
The provision is determined based on historical data, taking into account the nature of the existing claim, includes the
estimated maximum amount payable by the Group under its Professional Indemnity Insurance Policy on all claims
notified to its insurer.
Employee Benefits
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled
within twelve months of the reporting date are measured at the amounts based on remuneration rates which are
expected to be paid when the liability is settled. Liabilities arising later than one year have been measured at the present
value of the estimated future cash outflows to be made for those benefits. These estimated future cash flows have been
discounted using market yields, at the reporting date, on high quality corporate bonds with matching terms to maturity.
A bonus provision is recognised when it is payable in accordance with the employee’s contract of employment and the
amount can be reliably measured.
A provision for termination benefits is recognised when the entity can no longer withdraw the offer of those benefits, or if
earlier, when the termination benefits are included in a formal restructuring plan that has been announced to those
affected by it.
Employee benefit obligations are presented as current liabilities if the entity does not have an unconditional right to defer
settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to
occur.
Onerous Contracts
An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it. The unavoidable costs are the lower of the cost of fulfilling the
contract and any compensation or penalties arising from failure to fulfil the contract. The economic benefits expected to
be received include direct and indirect benefits under the contract and contractual and non-contractual benefits.
A provision for onerous contracts is measured at the present value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with the contract. For leased premises, the provision also includes any
costs associated with remediating the premises to the condition agreed in the contract. Before a provision is established,
the Group recognises any impairment loss on the assets associated with that contract if applicable.
Slater and Gordon Limited
Page 44
Slater and Gordon Limited
Page 45
53
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.6.1.
Accounting Policies (continued)
Third Party disbursements
The Group has an agreement with a third party disbursement funder, who funds disbursements in respect of individual
matters and is reimbursed out of any settlement proceeds on the matter. The Group has provided a financial guarantee
to the funder for the repayment of clients’ obligations. The provision for third party disbursements reflects the value of
clients’ obligations that are not expected to be recovered by the disbursement funder.
4.6.2. Provisions
Current
Employee benefits
Solicitor liability claims
Provision for third party disbursements
Provision for onerous contracts
Provision for payments to former owners
Other provisions
Non-current
Employee benefits
Provision for onerous contracts
Solicitor liability claims
Provision for dilapidations
Other provisions
4.7.
Fair Value Measurements
4.7.1. Accounting Policies
Critical Accounting Estimates and Judgements
2018
$’000
15,322
3,291
473
2,671
-
-
21,757
2,498
2,929
960
-
1,890
8,277
2017
$’000
19,176
12,479
880
5,294
5,550
11,153
54,532
3,429
3,286
-
7,475
6,982
21,172
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair
values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques
as follows:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
Level 2: inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3: inputs for the asset or liability that are not based on observable market data.
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then
the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy, as the lowest level
input that is significant to the entire measurement. The fair value of financial assets and financial liabilities not measured
at fair value approximates their carrying amounts as disclosed in the Statement of Financial Position and Notes to the
Financial Statements.
Slater and Gordon Limited
54
Page 46
Slater & Gordon Limited Annual Report 2018
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
1,419
455
1,874
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
4.6.1.
Accounting Policies (continued)
Third Party disbursements
The Group has an agreement with a third party disbursement funder, who funds disbursements in respect of individual
matters and is reimbursed out of any settlement proceeds on the matter. The Group has provided a financial guarantee
to the funder for the repayment of clients’ obligations. The provision for third party disbursements reflects the value of
clients’ obligations that are not expected to be recovered by the disbursement funder.
4.7.2. Fair Value Hierarchy
30 June 2018
Recurring fair value measurements
Financial liabilities
Derivative financial instruments – interest rate swaps
Contingent consideration *
30 June 2017
Recurring fair value measurements
Level 1
$’000
Level 2
$’000
Level 3
$’000
Financial liabilities
Derivative financial instruments – interest rate swaps
Contingent consideration *
-
-
-
1,419
-
1,419
-
455
455
4.6.2. Provisions
Current
Employee benefits
Solicitor liability claims
Provision for third party disbursements
Provision for onerous contracts
Provision for payments to former owners
Other provisions
Non-current
Employee benefits
Provision for onerous contracts
Solicitor liability claims
Provision for dilapidations
Other provisions
4.7.
Fair Value Measurements
4.7.1. Accounting Policies
Critical Accounting Estimates and Judgements
2018
$’000
15,322
3,291
473
2,671
21,757
-
-
-
2,498
2,929
960
1,890
8,277
2017
$’000
19,176
12,479
880
5,294
5,550
11,153
54,532
3,429
3,286
-
7,475
6,982
21,172
* Part of Vendor Liabilities which are included in Payables in the Statement of Financial Position
4.7.3. Valuation Techniques and Inputs used in Level 2 and 3 Fair Value Measurements
The fair value of the interest rate swaps is measured with reference to market data which can be used to estimate future
cash flows. The key input into this valuation is the interest rate swap revaluation statement as provided by Westpac
Banking Corporation and National Australia Bank. As at 30 June 2018, all interest rate swaps have been extinguished.
The fair value of contingent consideration payable in prior business combinations was measured with reference to
current fee and performance forecasts which were used to estimate future cash flows. The key inputs into this valuation
were the estimated future cash flows and the average discount rate of 9% was used to determine the present value of
the future cash flows. As a 30 June 2018, there was no contingent consideration for prior business combinations.
Note 5: Capital Structure and Financing
This section outlines how the Group manages its capital structure and related financing costs, including its balance sheet
liquidity and access to capital markets.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair
values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques
5.1. Cash and Cash Equivalents
5.1.1. Accounting Policies
as follows:
•
•
•
measurement date;
directly or indirectly; and
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
Level 2: inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
Level 3: inputs for the asset or liability that are not based on observable market data.
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then
the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy, as the lowest level
input that is significant to the entire measurement. The fair value of financial assets and financial liabilities not measured
at fair value approximates their carrying amounts as disclosed in the Statement of Financial Position and Notes to the
Financial Statements.
Cash and cash equivalents comprise cash on hand, deposits held at call with banks and short-term deposits with an
original maturity of three months or less. For the purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of outstanding banking overdrafts.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST/VAT component of
investing and financing activities, which are disclosed as operating cash flows.
5.2.
Financing Arrangements
5.2.1. Accounting Policies
Borrowing Costs
Borrowing costs can include interest expense, finance charges in respect of finance leases, amortisation of discounts or
premiums, ancillary costs relating to borrowings, and exchange differences arising from foreign currency borrowings to
the extent that they are regarded as an adjustment to interest costs.
Borrowing costs are expensed in the period which they are incurred, except for borrowing costs incurred as part of the
cost of the construction of a qualifying asset which are capitalised until the asset is ready for its intended use or sale.
Slater and Gordon Limited
Page 46
Slater and Gordon Limited
Page 47
55
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.2.2. Financing Arrangements
Separation of UK operations
On 6 December 2017, the Company’s shareholders approved a Recapitalisation of the Group with the implementation of
a creditor’s Scheme of Arrangement (“the Senior Lender Scheme”). The Senior Lender Scheme was effective from 15
December 2017 and implemented on 22 December 2017. The effect of the implementation of the Senior Lender Scheme
on the financial performance and position of the Group is disclosed in Note 10.
The key outcomes of the Senior Lender Scheme were as follows:
Separation of UK operations
Under the Senior Lender Scheme, effective from 15 December 2017, all UK operations and UK subsidiaries were
separated from the Group and transferred to a new UK holding company (“Slater and Gordon UK Holdings Limited”).
Slater and Gordon UK Holdings Limited is wholly owned by the Senior Lenders. Subsequently, the Group has ceased to
have any equity interest in the UK operations or UK subsidiaries.
As consideration for the transfer of the UK operations, the Australian Group received:
a)
b)
A promissory note of $40.0m, which was applied to reduce outstanding debt under the Australian Restated
Syndicated Facility Agreement (no cash directly transferred) (see below for more information).
A right to receive the first $40.0m of net proceeds from Watchstone-related claims in the UK (refer Watchstone
Receivable below for further information). This amount represents a contingent asset as the realisation of
income from the underlying Watchstone-related claims is not virtually certain (refer Note 7.3).
c) Assignment to Slater and Gordon UK Holdings Limited of $1.3m of intercompany payables owed by the
Australian Group to the UK operations.
Immediately prior to the transfer of the UK operations, secured debt owed by the UK subsidiaries to the Senior Lenders
of $674.2m was released. As partial consideration for this, S&G UK has issued interest-free convertible notes with a face
value of £250.0m to the Senior Lenders. The convertible notes entitle the holders to payment of any amounts, up to
£250.0m, received by S&G UK in respect of the net proceeds which may be received from successful settlement of the
Watchstone-related claims. The payment entitlement under the convertible notes is after settlement of the Watchstone
Receivable held by the Australian Group of $40.0m (refer below for more information) and repayment of the new Super
Senior Facility of S&G UK, which has a facility limit of £14.8m.
Issue of shares in the Company to the Senior Lenders
Prior to implementation of the Senior Lender Scheme, the Company undertook a share consolidation of 1 ordinary share
for every 100 on issue on 8 December 2017. On implementation of the Senior Lender Scheme, the Senior Lenders were
issued with 66,050,874 shares in the Company, representing 95% of the equity of the Australian Parent Company. The
Senior Lenders were also issued with 100% of the equity in a new company, Slater and Gordon UK Holdings Limited,
which owns the UK operations that were separated from the Company as described above.
The number of shares in the Australian Parent Company issued to each Senior Lender within the Senior Lenders group
was based on their commitments under the Super Senior Facility and Syndicated Facility Agreement.
New Australian Debt Facilities
Outstanding secured Australian debt has been permanently reduced by a combination of refinancing and restating debt.
The debt facilities of the Company on implementation of the Senior Lender Scheme were as follows:
a)
b)
Refinanced Super Senior Facility ($65.0m): Prior to implementation of the Senior Lender Scheme, the limit of
this facility was $40.0m, which was fully drawn down. The facility limit was increased by $25.0m to $65.0m
under the Senior Lender Scheme. The facility has a 3 year term commencing from the implementation date
(being 22 December 2017), with interest not payable until the end of the term. The facility is used for working
capital purposes. The total undrawn amount of the facility is nil at 30 June 2018.
Restated Syndicated Facility Agreement ($60.0m): Prior to the implementation of the Senior Lender Scheme,
the total balance owing under the Syndicated Facility Agreement was $125.6m. The balance owing was
restated to $60.0m through the issuance of shares in the Australian Parent Company and application of the
promissory note of $40.0m (discussed above) received as consideration for the transfer of the UK operations.
The balance owing was restated to $60.0m with the following key amendments:
•
•
a 5 year term from the implementation date of the Senior Lender Scheme, and
interest is not payable until the end of the term.
Payment of the deferred restructure fee relating to the previous restructure of the facility in May 2016, which
comprised warrants and cash of $1.6m and GBP£5.3m, has been further deferred and is now due at the end of
the new 5 year term.
c) Existing lease facilities of less than $5.0m.
Slater and Gordon Limited
56
Page 48
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.2.2. Financing Arrangements
Separation of UK operations
On 6 December 2017, the Company’s shareholders approved a Recapitalisation of the Group with the implementation of
a creditor’s Scheme of Arrangement (“the Senior Lender Scheme”). The Senior Lender Scheme was effective from 15
December 2017 and implemented on 22 December 2017. The effect of the implementation of the Senior Lender Scheme
on the financial performance and position of the Group is disclosed in Note 10.
The key outcomes of the Senior Lender Scheme were as follows:
Separation of UK operations
Under the Senior Lender Scheme, effective from 15 December 2017, all UK operations and UK subsidiaries were
separated from the Group and transferred to a new UK holding company (“Slater and Gordon UK Holdings Limited”).
Slater and Gordon UK Holdings Limited is wholly owned by the Senior Lenders. Subsequently, the Group has ceased to
have any equity interest in the UK operations or UK subsidiaries.
As consideration for the transfer of the UK operations, the Australian Group received:
a)
A promissory note of $40.0m, which was applied to reduce outstanding debt under the Australian Restated
Syndicated Facility Agreement (no cash directly transferred) (see below for more information).
b)
A right to receive the first $40.0m of net proceeds from Watchstone-related claims in the UK (refer Watchstone
Receivable below for further information). This amount represents a contingent asset as the realisation of
income from the underlying Watchstone-related claims is not virtually certain (refer Note 7.3).
c) Assignment to Slater and Gordon UK Holdings Limited of $1.3m of intercompany payables owed by the
Australian Group to the UK operations.
Immediately prior to the transfer of the UK operations, secured debt owed by the UK subsidiaries to the Senior Lenders
of $674.2m was released. As partial consideration for this, S&G UK has issued interest-free convertible notes with a face
value of £250.0m to the Senior Lenders. The convertible notes entitle the holders to payment of any amounts, up to
£250.0m, received by S&G UK in respect of the net proceeds which may be received from successful settlement of the
Watchstone-related claims. The payment entitlement under the convertible notes is after settlement of the Watchstone
Receivable held by the Australian Group of $40.0m (refer below for more information) and repayment of the new Super
Senior Facility of S&G UK, which has a facility limit of £14.8m.
Issue of shares in the Company to the Senior Lenders
Prior to implementation of the Senior Lender Scheme, the Company undertook a share consolidation of 1 ordinary share
for every 100 on issue on 8 December 2017. On implementation of the Senior Lender Scheme, the Senior Lenders were
issued with 66,050,874 shares in the Company, representing 95% of the equity of the Australian Parent Company. The
Senior Lenders were also issued with 100% of the equity in a new company, Slater and Gordon UK Holdings Limited,
which owns the UK operations that were separated from the Company as described above.
The number of shares in the Australian Parent Company issued to each Senior Lender within the Senior Lenders group
was based on their commitments under the Super Senior Facility and Syndicated Facility Agreement.
New Australian Debt Facilities
Outstanding secured Australian debt has been permanently reduced by a combination of refinancing and restating debt.
The debt facilities of the Company on implementation of the Senior Lender Scheme were as follows:
a)
Refinanced Super Senior Facility ($65.0m): Prior to implementation of the Senior Lender Scheme, the limit of
this facility was $40.0m, which was fully drawn down. The facility limit was increased by $25.0m to $65.0m
under the Senior Lender Scheme. The facility has a 3 year term commencing from the implementation date
(being 22 December 2017), with interest not payable until the end of the term. The facility is used for working
capital purposes. The total undrawn amount of the facility is nil at 30 June 2018.
b)
Restated Syndicated Facility Agreement ($60.0m): Prior to the implementation of the Senior Lender Scheme,
the total balance owing under the Syndicated Facility Agreement was $125.6m. The balance owing was
restated to $60.0m through the issuance of shares in the Australian Parent Company and application of the
promissory note of $40.0m (discussed above) received as consideration for the transfer of the UK operations.
The balance owing was restated to $60.0m with the following key amendments:
•
•
a 5 year term from the implementation date of the Senior Lender Scheme, and
interest is not payable until the end of the term.
Payment of the deferred restructure fee relating to the previous restructure of the facility in May 2016, which
comprised warrants and cash of $1.6m and GBP£5.3m, has been further deferred and is now due at the end of
the new 5 year term.
c) Existing lease facilities of less than $5.0m.
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.2.2. Financing Arrangements (continued)
Watchstone Receivable
As noted above, as partial consideration for the transfer of S&G UK shares from the Company to Slater and Gordon UK
Holdings Limited, the Company has recourse to the first $40.0m of any proceeds that S&G UK receives from successful
settlement of the Watchstone-related claims (refer to Note 7.3). These are required to be applied by the Company first to
reduce the Super Senior Facility. This amount represents a contingent asset, and has not been recognised as a
receivable as the inflow of economic benefits is not considered virtually certain. It has been disclosed as a contingent
asset (refer Note 7.3 for details).
Security
The security that was provided over the Australian Operations in respect of secured facilities of the UK Operations was
released in full on implementation of the Senior Lender Scheme. No ongoing security has been provided by the
Australian Group for UK debt. For details of other security provided to S&G UK by the Australian Operations, please refer
Note 6.1.
Disbursement asset backed facility
In June 2018 the Company entered into a disbursement asset backed facility with an external funder. The initial
drawdown on the facility occurred on 29 June 2018 for $13,000,000. Interest on the facility is payable annually in
advance. The facility is secured against disbursement assets (security pool). Future receipts of the security pool must be
applied in repayment of the facility when they are received, accordingly the amount classified as current is based on
expected disbursement repayments. Any outstanding balance is fully repayable on 29 December 2020. The facility
contains a redraw facility (maximum of $5,000,000) available until 30 September 2018, subject to the Company satisfying
certain conditions.
Net Debt
As at 30 June 2018, the Group has fully drawn its Syndicated Facility Agreement and Super Senior Facility.
The Group has cash on hand of $18,778,000 (30 June 2017: $33,303,000), offset by debt of $143,701,000, deferred
restructure and underwriting fees of $11,417,000 and finance lease liability of $1,000 resulting in net debt of
$136,341,000 (30 June 2017: $747,700,000). The Group’s net debt position has improved since 30 June 2017 by
$611,359,000, primarily as a result of implementation of the Senior Lender Scheme.
Debt reconciliation
Super
senior
facility
Syndicated
Facility
Agreement
Debt
raising
costs
under
SFA
$'000 (1)
$'000
15,000
58,475
-
$'000
761,599
(749)
-
-
-
-
(9,013)
(735,744)
749
11,114
386
-
4,666
69,514
19,534
-
15,876
61,265
-
-
-
-
Fees
$'000
-
-
-
164
-
139
Disburseme
nt asset
backed
facility
Finance
Lease
Liability
Derivat
ives
$'000
-
12,922
-
-
-
-
-
$'000
5,092
-
$'000
1,419
-
(5,407)
(972)
Total
782,361
71,397
(6,379)
-
-
-
316
1
-
(732,894)
379
20,463
(826)
-
-
(826)
20,997
155,119
11,417
12,922
Balance at 1 July 2017
Drawdowns
Repayments
Restated/extinguished as part
of Senior Lender Scheme
Foreign currency translation
movement
Changes in fair values
Accrued interest
Balance at 30 June 2018
Slater and Gordon Limited
Page 48
Senior Lender Scheme.
Slater and Gordon Limited
Page 49
57
(1) Relates to debt raising costs previously capitalised in the carrying amount of borrowings which were restated on extinguishment of related borrowings on implementation of the
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.2.3. Summary of Borrowing Arrangements
At reporting date, the following banking facilities had been executed and were available.
Total banking facilities
Bank overdrafts
Super senior facility
Syndicated facility agreement
Disbursement backed asset facility
Finance lease facility
Total credit facilities
Facilities utilised
Current
Disbursement asset backed facility
Super senior facility(1)
Underwriter fees
Debt raising costs (2)
Syndicated facility agreement(3)
Finance lease liability
Non-current
Disbursement asset backed facility
Super senior facility(3)
Deferred restructure fee
Syndicated facility agreement(3)
Finance lease liability
2018
$’000
-
65,000
60,000
13,000
1
138,001
8,519
1,678
1,600
-
-
1
11,798
4,403
67,836
9,817
61,265
-
143,321
2017
$’000
1,691
40,000
761,599
-
6,800
810,090
-
15,000
-
(749)
450,192
1,797
466,240
-
-
-
311,407
3,295
314,702
Maturity
Ongoing until 29 Dec 2020
24 Dec 2018
24 Dec 2018
2 Jul 2018
Ongoing until 29 Dec 2020
22 Dec 2020
22 Dec 2022
22 Dec 2022
(1) Includes accrued interest capitalised prior to Recapitalisation of $1,678,000 under current.
(2) As at 30 June 2017 this comprises the unamortised value of borrowing costs on establishment of $4.4m and refinance of net debt facilities of $(3.6m).
These costs are deferred on the balance sheet and amortised to the Statement of Profit or Loss and Other Comprehensive Income (Finance costs) over
the earliest maturity date of the facility.
(3) Includes capitalised interest costs as agreed with the lenders.
A portion of the bills of exchange was the subject of interest rate swaps to hedge the risk of an adverse interest rate
movement. Hedging was discontinued on implementation of the Senior Lender Scheme. Refer to Note 5.4 for more
details.
5.3. Leasing
5.3.1.
Accounting Policies
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the
inception of the lease and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use the asset, even if the right is not explicitly
specified in the arrangement. The lease is classified at the inception date as a finance lease or an operating lease.
Finance Leases
A lease that transfers substantially all of the risks and rewards incidental to ownership to the Group is classified as a
finance lease.
Finance leases are capitalised at the commencement of the lease, at the inception date fair value of the leased property
or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised as finance costs in the Statement of Profit or Loss and Other Comprehensive
Income. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely the
Group will obtain ownership of the asset, or if not, over the shorter of the estimated useful life of the asset and the term of
the lease.
The Group leases a certain number of its fixed assets under finance leases. These were substantially settled during the
year.
Slater and Gordon Limited
58
Page 50
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.2.3. Summary of Borrowing Arrangements
5.3.1
Accounting Policies (continued)
At reporting date, the following banking facilities had been executed and were available.
Future minimum rentals payable under finance leases as at 30 June are, as follows:
2018
$’000
2017
$’000
Minimum
payments
1
Interest
-
Present
value of
payments
1
Minimum
payments Interest
(256)
2,053
-
1
-
-
-
1
3,484
(189)
5,537
(445)
Present
value of
payments
1,797
3,295
5,092
Within one year
One year or later and not later than five years
Operating Leases
An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating
expense in the Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the lease
term. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over
the life of the lease.
Commitments and contingencies are disclosed net of the amount of GST/VAT recoverable from, or payable to, the
relevant taxation authority.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are, as follows:
Disbursement asset backed facility
Ongoing until 29 Dec 2020
Within one year
One year or later and not later than five years
Greater than five years
2018
$’000
13,525
24,531
8,250
46,306
2017
$’000
25,665
62,194
49,717
137,576
2018
$’000
65,000
60,000
13,000
-
1
138,001
8,519
1,678
1,600
-
-
1
11,798
4,403
67,836
9,817
61,265
-
143,321
2017
$’000
1,691
40,000
761,599
6,800
810,090
15,000
(749)
450,192
1,797
466,240
311,407
3,295
314,702
-
-
-
-
-
-
Maturity
24 Dec 2018
24 Dec 2018
2 Jul 2018
22 Dec 2020
22 Dec 2022
22 Dec 2022
Disbursement asset backed facility
Ongoing until 29 Dec 2020
Total banking facilities
Bank overdrafts
Super senior facility
Syndicated facility agreement
Disbursement backed asset facility
Finance lease facility
Total credit facilities
Facilities utilised
Current
Super senior facility(1)
Underwriter fees
Debt raising costs (2)
Syndicated facility agreement(3)
Finance lease liability
Non-current
Super senior facility(3)
Deferred restructure fee
Syndicated facility agreement(3)
Finance lease liability
details.
5.3. Leasing
5.3.1.
Accounting Policies
(1) Includes accrued interest capitalised prior to Recapitalisation of $1,678,000 under current.
(2) As at 30 June 2017 this comprises the unamortised value of borrowing costs on establishment of $4.4m and refinance of net debt facilities of $(3.6m).
These costs are deferred on the balance sheet and amortised to the Statement of Profit or Loss and Other Comprehensive Income (Finance costs) over
the earliest maturity date of the facility.
(3) Includes capitalised interest costs as agreed with the lenders.
A portion of the bills of exchange was the subject of interest rate swaps to hedge the risk of an adverse interest rate
movement. Hedging was discontinued on implementation of the Senior Lender Scheme. Refer to Note 5.4 for more
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at the
inception of the lease and requires an assessment of whether the fulfilment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use the asset, even if the right is not explicitly
specified in the arrangement. The lease is classified at the inception date as a finance lease or an operating lease.
Finance Leases
finance lease.
the lease.
year.
A lease that transfers substantially all of the risks and rewards incidental to ownership to the Group is classified as a
Finance leases are capitalised at the commencement of the lease, at the inception date fair value of the leased property
or, if lower, the present value of the minimum lease payments. Lease payments are apportioned between finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised as finance costs in the Statement of Profit or Loss and Other Comprehensive
Income. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely the
Group will obtain ownership of the asset, or if not, over the shorter of the estimated useful life of the asset and the term of
The Group leases a certain number of its fixed assets under finance leases. These were substantially settled during the
Slater and Gordon Limited
Page 50
Slater and Gordon Limited
Page 51
59
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.4.
Financial Risk Management
5.4.1.
Accounting Policies
The Group’s principal financial instruments comprise cash and cash equivalents, loans and receivables, trade payables
and loans. The classification of financial instruments depends on the purpose for which the instruments were acquired.
Management determines the classification of its financial instruments at initial recognition.
Financial Assets
Loans and receivables are non-interest bearing, non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. The loans are initially recognised based on fair value plus directly attributable
transaction costs and are subsequently stated at amortised cost using the effective interest rate method.
Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence
of impairment.
For loans and receivables carried at amortised cost, impairment loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate. The amount of the loss reduces the carrying
amount of the asset and is recognised in profit or loss. The impairment loss is reversed through profit or loss if the
amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event
occurring after the impairment was recognised.
Non-Derivative Financial Liabilities
Non-derivative financial liabilities include trade payables, other creditors and loans from third parties including loans from
or other amounts due to director-related entities.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt, net of directly attributable
transaction costs less principal payments and amortisation using the effective interest rate method.
Non-interest bearing financial liabilities for deferred cash consideration on the acquisition of acquired firms is measured
at amortised cost using the effective interest rate method. The implied interest expense is recognised in profit or loss.
Derivative Financial Instruments
The Group designates certain derivatives as either:
•
•
hedges of fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
hedges of highly probable forecast transactions (cash flow hedges).
During the period, the Group only had cash flow hedges, relating to interest rate risk management. Hedging was
discontinued from the date of implementation of the Senior Lender Scheme due to the extinguishment of the hedged
item. All related hedging instruments had been closed out as at 30 June 2018.
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated in the hedge reserve which forms part of equity. The gain
or loss relating to the ineffective portion is recognised immediately in the consolidated Statement of Profit or Loss and
Other Comprehensive Income.
Amounts accumulated in the hedge reserve in equity are transferred to profit or loss in the periods when the hedged item
will affect profit or loss.
Slater and Gordon Limited
60
Page 52
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.4.
Financial Risk Management
5.4.1.
Accounting Policies
The Group’s principal financial instruments comprise cash and cash equivalents, loans and receivables, trade payables
and loans. The classification of financial instruments depends on the purpose for which the instruments were acquired.
Management determines the classification of its financial instruments at initial recognition.
Financial Assets
of impairment.
Loans and receivables are non-interest bearing, non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. The loans are initially recognised based on fair value plus directly attributable
transaction costs and are subsequently stated at amortised cost using the effective interest rate method.
Financial assets are tested for impairment at each financial year end to establish whether there is any objective evidence
For loans and receivables carried at amortised cost, impairment loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate. The amount of the loss reduces the carrying
amount of the asset and is recognised in profit or loss. The impairment loss is reversed through profit or loss if the
amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event
occurring after the impairment was recognised.
Non-Derivative Financial Liabilities
Non-derivative financial liabilities include trade payables, other creditors and loans from third parties including loans from
or other amounts due to director-related entities.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt, net of directly attributable
transaction costs less principal payments and amortisation using the effective interest rate method.
Non-interest bearing financial liabilities for deferred cash consideration on the acquisition of acquired firms is measured
at amortised cost using the effective interest rate method. The implied interest expense is recognised in profit or loss.
Derivative Financial Instruments
The Group designates certain derivatives as either:
•
•
hedges of fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
hedges of highly probable forecast transactions (cash flow hedges).
During the period, the Group only had cash flow hedges, relating to interest rate risk management. Hedging was
discontinued from the date of implementation of the Senior Lender Scheme due to the extinguishment of the hedged
item. All related hedging instruments had been closed out as at 30 June 2018.
Cash Flow Hedge
Other Comprehensive Income.
will affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated in the hedge reserve which forms part of equity. The gain
or loss relating to the ineffective portion is recognised immediately in the consolidated Statement of Profit or Loss and
Amounts accumulated in the hedge reserve in equity are transferred to profit or loss in the periods when the hedged item
5.4.2.
Interest Rate Risk
The Group's exposure to interest rate risk and the effective interest rates of non-derivative financial assets and financial
liabilities both recognised and unrecognised at the end of the reporting period are as follows:
Variable interest rate
Fixed interest rate
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Total
2018
$’000
2017
$’000
Financial assets
Cash and bank guarantees on
deposit(1)
Total financial assets
Financial liabilities
Other current liabilities
Finance lease liability
Disbursement backed asset
facility
Super senior facility
Debt raising costs under the SFA
Syndicated facility agreement
Total financial liabilities
22,711
22,711
-
-
-
-
-
61,265
61,265
33,303
33,303
1,815
-
-
15,000
-
674,312
691,127
-
-
-
1
12,922
69,514
9,817
-
92,254
-
-
22,711
22,711
-
5,092
-
-
-
87,287
92,379
-
1
12,922
69,514
9,817
61,265
153,519
33,303
33,303
1,815
5,092
-
15,000
-
761,599
783,506
(1) This includes cash and cash equivalents of $18,778,000 and restricted bank guarantees on deposit of $3,933,000.
Interest rate swap transactions were entered into by the Group to exchange variable interest payment obligations to
fixed, to protect long-term borrowings from the risk of increasing interest rates. The Group used swap contracts to
maintain a designated proportion of fixed to floating debt until the date of capitalisation. Hedging was discontinued from
the date of implementation of the Senior Lender Scheme due to the extinguishment of the hedged item. All swaps had
been closed out as at 30 June 2018.
At the end of the reporting period, the details of outstanding contracts, all of which are to receive floating/pay-fixed
interest rate swaps, are as follows:
Maturity of notional amounts
Effective average fixed interest
rate payable
Notional principal value
0 to 2 years
2 to 5 years
2018
-
-
2017
2.39%
2.32%
2018
$’000
-
-
-
2017
$’000
68,830
18,457
87,287
Interest rate swaps were measured at fair value with gains and losses taken to the cash flow hedge reserve until such
time as the profit or loss associated with the hedged risk is recognised in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income. The balance of the cash flow hedge reserve was reclassified from equity to profit or
loss on discontinuation of hedge accounting on implementation of the Senior Lender Scheme and extinguishment of the
hedged item.
Interest Rate Sensitivity
If interest rates were to increase/decrease by 100 basis points from rates used to determine fair values as at the end of
the reporting period, assuming all other variables that might impact on fair value remain constant, then the impact on
profit for the year and equity would be as follows:
+/- 100 basis points:
Impact on profit after tax
Impact on equity
2018
$’000
-
-
2017
$’000
-
1,168
As all borrowings at 30 June 2018 are measured at amortised cost and not fair value, any movement in interest rates
does not impact the carrying value of those borrowings but would impact their related interest charges.
Slater and Gordon Limited
Page 52
Slater and Gordon Limited
Page 53
61
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.4.3. Foreign Exchange Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group’s exposure to foreign currency risk relates primarily to amounts payable in
foreign currency (GBP£4,740,000 at 30 June 2018). The Group’s investment in the UK operations was transferred under
the Senior Lender Scheme on 15 December 2017. The balance accumulated in the foreign currency translation reserve
($17,104,000 gain) was reclassified from equity to profit or loss on transfer of the UK operations.
The Group has no other significant exposures to foreign exchange risk.
Foreign Exchange Rate Sensitivity
If foreign exchange rates were to increase/decrease by 10 per cent from rates used to determine fair values as at the
end of the reporting period, assuming all other variables that might impact on fair value remain constant, then the impact
on profit for the year would be as follows:
Impact on profit after tax – 10% decrease in AUD/GBP exchange rate
Impact on profit after tax – 10% increase in AUD/GBP exchange rate
5.4.4. Credit Risk
2018
$’000
(583)
530
2017
$’000
-
-
Credit risk arises from the financial assets of the Group. The main exposure to credit risk in the Group is represented by
receivables (debtors and disbursements) owing to the Group. The Group’s exposure to credit risk arises from potential
default of the counterparty, with a maximum exposure equal to the carrying amount of those assets as disclosed in the
statement of financial position and notes to the financial statements.
The Group held cash and cash equivalents and restricted bank guarantees on deposit of $22,711,000 at 30 June 2018
(30 June 2017: $33,303,000). The credit risk associated with cash and cash equivalents is considered minimal as the
cash and cash equivalents are held with reputable financial institutions in Australia.
Receivables
There is also credit risk associated with unrendered disbursements and trade receivables. Once client matters are billed,
a significant portion of receivables related to the personal injuries business are considered low risk. This is because
these receivables are collected directly from settlements paid by insurers into trust funds held on behalf of the Group’s
clients. For the non-personal injury law business, the Group is exposed to the credit risk associated with the client’s
ability to meet their obligations under the fee and retainer agreement. The Group minimises the concentration of this
credit risk by undertaking transactions with a large number of clients.
Management of Credit Risk
The Group actively manages its credit risk by:
•
•
assessing the capability of a client to meet its obligations under the fee and retainer agreement;
periodically reviewing the reasons for bad debt write-offs in order to improve the future decision making process;
• maintaining an adequate provision against the future recovery of debtors and disbursements;
•
•
including in practitioner’s Key Performance Indicators (“KPI’s”) measurements in respect of debtor levels, recovery
and investment in disbursements;
providing ongoing training to staff in the management of their personal and practice group debtor portfolios; and
• where necessary, pursuing the recovery of debts owed to the Group through external mercantile agents and the
courts.
Due to the nature of the “No Win No Fee” arrangements applicable to the majority of the legal matters managed by the
Group an increase in the required processing time between initiation and settlement and an increase in the ageing of
receivables, particularly disbursements, does not always increase the associated credit risk.
Management performs periodic assessment of the recoverability of receivables, and provisions are calculated based on
historical write-offs of the receivables as well as any known circumstances relating to the matters in progress.
Slater and Gordon Limited
62
Page 54
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.4.3. Foreign Exchange Risk
5.4.5. Liquidity Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group’s exposure to foreign currency risk relates primarily to amounts payable in
foreign currency (GBP£4,740,000 at 30 June 2018). The Group’s investment in the UK operations was transferred under
the Senior Lender Scheme on 15 December 2017. The balance accumulated in the foreign currency translation reserve
($17,104,000 gain) was reclassified from equity to profit or loss on transfer of the UK operations.
The Group has no other significant exposures to foreign exchange risk.
Foreign Exchange Rate Sensitivity
If foreign exchange rates were to increase/decrease by 10 per cent from rates used to determine fair values as at the
end of the reporting period, assuming all other variables that might impact on fair value remain constant, then the impact
on profit for the year would be as follows:
2018
$’000
(583)
530
2017
$’000
-
-
Impact on profit after tax – 10% decrease in AUD/GBP exchange rate
Impact on profit after tax – 10% increase in AUD/GBP exchange rate
5.4.4. Credit Risk
Credit risk arises from the financial assets of the Group. The main exposure to credit risk in the Group is represented by
receivables (debtors and disbursements) owing to the Group. The Group’s exposure to credit risk arises from potential
default of the counterparty, with a maximum exposure equal to the carrying amount of those assets as disclosed in the
statement of financial position and notes to the financial statements.
The Group held cash and cash equivalents and restricted bank guarantees on deposit of $22,711,000 at 30 June 2018
(30 June 2017: $33,303,000). The credit risk associated with cash and cash equivalents is considered minimal as the
cash and cash equivalents are held with reputable financial institutions in Australia.
Receivables
There is also credit risk associated with unrendered disbursements and trade receivables. Once client matters are billed,
a significant portion of receivables related to the personal injuries business are considered low risk. This is because
these receivables are collected directly from settlements paid by insurers into trust funds held on behalf of the Group’s
clients. For the non-personal injury law business, the Group is exposed to the credit risk associated with the client’s
ability to meet their obligations under the fee and retainer agreement. The Group minimises the concentration of this
credit risk by undertaking transactions with a large number of clients.
Management of Credit Risk
The Group actively manages its credit risk by:
assessing the capability of a client to meet its obligations under the fee and retainer agreement;
periodically reviewing the reasons for bad debt write-offs in order to improve the future decision making process;
• maintaining an adequate provision against the future recovery of debtors and disbursements;
including in practitioner’s Key Performance Indicators (“KPI’s”) measurements in respect of debtor levels, recovery
and investment in disbursements;
providing ongoing training to staff in the management of their personal and practice group debtor portfolios; and
• where necessary, pursuing the recovery of debts owed to the Group through external mercantile agents and the
•
•
•
•
courts.
Due to the nature of the “No Win No Fee” arrangements applicable to the majority of the legal matters managed by the
Group an increase in the required processing time between initiation and settlement and an increase in the ageing of
receivables, particularly disbursements, does not always increase the associated credit risk.
Management performs periodic assessment of the recoverability of receivables, and provisions are calculated based on
historical write-offs of the receivables as well as any known circumstances relating to the matters in progress.
The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of
operating cash flows and committed available credit facilities. The Group actively reviews its funding position to ensure
the available facilities are adequate to meet its current and anticipated needs.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate borrowing facilities are
maintained. Refer to the statement of cash flows and Note 3.3 Cash Flow Information, for further information on the
historical cash flows. Further information in relation to bank facilities available and utilised are outlined in Note 5.2
Financing Arrangements.
KPIs are set for practitioners relating to budgeted fee events, which are closely monitored by senior management.
Maturity Analysis
The table below represents the estimated and undiscounted contractual settlement terms for financial instruments and
management’s expectation for settlement of undiscounted maturities. Cash flows for floating rate financial instruments
have been presented based on the rate prevailing at the balance date.
2018
Non-derivative financial liabilities
Payables
Borrowings
Financial liability maturities
2017
Non-derivative financial liabilities
Payables
Borrowings
Other current liabilities
Financial liability maturities
< 12 Months
$’000
52,091
14,026
66,117
1-5 years
$’000
-
175,599
175,599
Total contractual
cash flows
$’000
52,091
189,625
241,716
Carrying
amount
$’000
52,091
155,119
207,210
418,619
499,121
1,815
919,555
-
322,287
-
322,287
418,619
821,408
1,815
418,619
780,942
1,815
1,241,842
1,201,376
Refer to Note 5.4.2 for the maturity analysis of interest rate swaps.
5.4.6. Fair Value Risk
The fair value of financial assets and financial liabilities not measured at fair value approximates their carrying amounts
as disclosed in the statement of financial position and notes to the financial statements.
The Group measures its interest rate swaps at fair value. These fair values are based on level 2 fair value
measurements, as defined in the fair value hierarchy in AASB 13 Fair Value Measurement with reference to market data
which can be used to estimate future cash flows and discount them to present value. Management’s aim is to use and
source this data consistently from period to period.
Slater and Gordon Limited
Page 54
Slater and Gordon Limited
Page 55
63
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.5.
Contributed Equity
Ordinary shares fully paid
Balance at the end of the year
Movement in Ordinary Share Capital
2018
Shares
69,527,235
2018
$’000
1,348,581
2017
Shares
347,245,601
69,527,235
1,348,581
347,245,601
2017
$’000
1,119,235
1,119,235
347,245,601
Balance at the beginning of the year
1,119,235
352,377,933
1,116,573
Issued during the year
• EOP Share Buy Back
• Consolidation of share prior to
Recapitalisation(1)
• Issuance of shares under Senior Lender
Scheme
• Equity Incentive Plan
• Transfer from share-based payment reserve
• Costs of share registry management
Balance at the end of the year
-
(343,769,240)
-
-
66,050,874
-
-
-
221,270
-
8,076
-
(5,132,332)
(9,232)
-
-
-
-
-
-
-
-
11,907
(13)
69,527,235
1,348,581
347,245,601
1,119,235
Total Share Capital balance at the end of the
year
69,527,235
1,348,581
347,245,601
1,119,235
(1) On 8 December 2017, the Company undertook a share consolidation of 1 ordinary share for every 100 on issue.
Ordinary Shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of
shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
During the financial year ended 30 June 2018, the Company did not pay a dividend (30 June 2017: $Nil).
5.6.
Share-Based Payment Arrangements
5.6.1. Accounting Policies
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date.
The consolidated entity operates share-based payment employee share and option schemes. The fair value of the equity
to which employees become entitled is measured at grant date and recognised as an expense over the vesting period,
with a corresponding increase to an equity account. In respect of share-based payments that are dependent on the
satisfaction of performance conditions, the number of shares and options expected to vest is reviewed and adjusted at
each reporting date. The amount recognised for services received as consideration for these equity instruments granted
is adjusted to reflect the best estimate of the number of equity instruments that eventually vest.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the
goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
Slater and Gordon Limited
64
Page 56
Slater & Gordon Limited Annual Report 2018
Balance at the beginning of the year
347,245,601
1,119,235
352,377,933
1,116,573
Ordinary shares fully paid
Balance at the end of the year
Movement in Ordinary Share Capital
Issued during the year
• EOP Share Buy Back
• Consolidation of share prior to
Recapitalisation(1)
• Issuance of shares under Senior Lender
Scheme
• Equity Incentive Plan
• Transfer from share-based payment reserve
• Costs of share registry management
2018
Shares
2018
$’000
2017
Shares
69,527,235
1,348,581
347,245,601
69,527,235
1,348,581
347,245,601
2017
$’000
1,119,235
1,119,235
(343,769,240)
66,050,874
221,270
-
-
-
-
-
-
-
-
8,076
(5,132,332)
(9,232)
-
-
-
-
-
-
-
-
11,907
(13)
Balance at the end of the year
69,527,235
1,348,581
347,245,601
1,119,235
(1) On 8 December 2017, the Company undertook a share consolidation of 1 ordinary share for every 100 on issue.
Ordinary Shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of
shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
During the financial year ended 30 June 2018, the Company did not pay a dividend (30 June 2017: $Nil).
5.6.
Share-Based Payment Arrangements
5.6.1. Accounting Policies
of the equity instruments at the grant date.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value
The consolidated entity operates share-based payment employee share and option schemes. The fair value of the equity
to which employees become entitled is measured at grant date and recognised as an expense over the vesting period,
with a corresponding increase to an equity account. In respect of share-based payments that are dependent on the
satisfaction of performance conditions, the number of shares and options expected to vest is reviewed and adjusted at
each reporting date. The amount recognised for services received as consideration for these equity instruments granted
is adjusted to reflect the best estimate of the number of equity instruments that eventually vest.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the
goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
5.5.
Contributed Equity
5.6.2. Employee Equity Incentive Plan (“EIP”)
For cash-settled share-based payment transactions, the liability needs to be remeasured at the end of each reporting
period up to the date of settlement, with any changes in fair value recognised in the profit or loss. This requires a
reassessment of the estimates used at the end of each reporting period.
The Company introduced a broad based equity incentive plan which was approved by the Shareholders at the 2014
Annual General Meeting.
(i).
Exempt Share Save Scheme (“SSS”)
In 2015 the Group introduced an offer for Exempt Shares in the Equity Incentive Plan. The Plan gave the Company’s
employees the opportunity to acquire shares in the Company. Each year, participating employees could make
contributions from their pre-tax salary to acquire $500 worth of shares. Such employee contributions were matched by
the Company with an additional $500 worth of shares being acquired for each participating employee. All employees who
are Australian tax residents with at least 6 months service were entitled to participate in this Plan. Shares acquired under
this Plan are subject to a holding period of 3 years. The Plan is in runoff and no further shares will be issued. There was
no issue of shares under this scheme in the current year ended 30 June 2018 (30 June 2017: Nil shares).
(ii).
Share Incentive Plan (“SIP”)
The plan also incorporates a tax-approved scheme to employees in the UK. The Plan gave the Company’s employees
the opportunity to acquire shares in the Company. Employees could make contributions from their pre-tax salary to
acquire £375 (max) worth of shares. Such employee contributions were matched by the Company with a free share for
every share purchased by the employee. All employees of the Group in the UK with at least 6 months service were
entitled to participate in this Plan. Shares acquired under this plan are held in trust by MM&K Share Plan Trustee Ltd for
a period of 5 years from the date of acquisition. The Plan is in runoff and no further shares will be issued. There was no
issue of shares under this plan during the year ended 30 June 2018 (30 June 2017: Nil shares).
Total Share Capital balance at the end of the
year
69,527,235
1,348,581
347,245,601
1,119,235
5.6.3. Share Based Payment Arrangements to Former Owners
Included in the terms of a number of purchase agreements entered into by the Group is an arrangement whereby the
payment of cash consideration to and/or the retention of share-based consideration by the vendors of acquired entities is
contingent upon the relevant vendors remaining with the Group for a defined period. If a vendor ceases to remain with
the Group for the prescribed period, the vendor may forfeit its entitlement to payment of the cash consideration and/or its
ability to retain its share-based consideration, at the discretion of the Group.
These arrangements are treated as a share-based payment transaction with the former owners. The transaction is
measured at the fair value of the equity instruments granted and then recognised as an expense over the vesting period
as agreed per each contract. The relevant expense is disclosed in the statement of profit or loss and other
comprehensive income.
5.6.4. Share Based Payment Arrangements under the Syndicated Facility Agreement (“SFA”)
As referred to in Note 5.2.2, in May 2016, the terms of the multicurrency SFA were revised. Under the revised terms, the
Group is required to pay a deferred restructure fee to its lenders on refinancing or maturity of the debt in the form of cash
or warrants, at the irrevocable option of the lender. As reported to the market on 6 June 2016, 58.4% of lenders elected
to be paid in cash whilst 41.6% have elected to be paid in warrants.
The deferred restructure fee was accounted for as a compound share-based payment within the scope of AASB 2,
including a debt and equity component. The total value of the restructure fee was measured directly, with reference to
the fair value of the debt establishment services, being $17,821,000. This was determined by proxy as the present value
of the cash settlement option which amounted to $20,175,000, therefore the initial liability was recognised at $17,821,000
and the residual equity component was initially measured at nil.
Partial settlement of the deferred restructure fee liability occurred in June 2016 when 41.6% of the lenders elected to
take the warrant payment option. This resulted in a reclassification from liability to share based payment reserve in
equity of $7,413,000 with no gain or loss recognised on reclassification. Despite not being due until at least 29 May
2018, the warrants vested immediately, as there are no conditions attached to the exercise of the warrants. This equity
component is not remeasured after vesting and no gain or loss will be recognised when the share capital is issued on
settlement. The remaining cash payment was treated as a cash-settled share-based payment, and was also not due until
29 May 2018.
As a result of the revision of the SFA under the Senior Lender Scheme on 22 December 2017, the deferred restructure
fee was further deferred, and is now due at the end of the new 5 year term, and the cash portion of the deferred
restructure fee was remeasured to fair value at that date. The liability recognised for the remaining cash component as at
30 June 2018 is $9,817,000 (30 June 2017: $11,783,000) and is included in the net long term borrowings amounts as
detailed in Note 5.2.3.
Slater and Gordon Limited
Page 56
Slater and Gordon Limited
Page 57
65
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Note 6: Other Notes
6.1. Related Party Disclosures
6.1.1. Equity Interests in Related Parties
The table below lists the primary operating controlled entities of the Group. Individual controlled entities that are dormant
have not been listed. All are owned 100% unless noted.
Country of Incorporation
2018
2017
% Equity Interest
% Equity Interest
2018
2017
Australia
Trilby Misso Lawyers Limited
Slater & Gordon Lawyers NSW
Pty Limited
Conveyancing Works (Qld) Pty
Limited
United Kingdom
SGL UK
Walker Smith Way Limited
WSW Limited
Slater & Gordon (UK) 1 Limited
4 Legal Limited
SGS
iSaaS Technology Limited
Compass Costs Consultants Ltd
Intelligent Claims Management
Limited
Mobile Doctors Group Limited
Medici Legal Limited
Mobile Doctors Solutions Limited
Mobile Doctors Limited
React & Recover Medical Group
Limited
Recover Healthcare Limited
React Medical Reporting Limited
Malta
Overland Limited
Overland Health Limited
100%
100%
100%
100%
Schultz Toomey O’Brien Pty
Ltd
100%
100%
100%
All States Legal Co Pty Ltd
100%
100%
100%
SG NSW Pty Ltd
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
4 Legal Solutions Limited
Slater & Gordon (UK) LLP
Adroit Financial Planning
Limited
React Medical Management
Limited
Medicalaw Limited
Abstract Legal Holdings
Limited
Accident Advice Helpline Direct
Limited
Legal Facilities & Management
Services Limited
Access to Compensation
Limited
Liberty Protect Limited
Slater Gordon Solutions Legal
Services Limited
SGS Business Process
Services (UK) Limited
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Overland Malta (Trading)
Limited
0%
100%
The Immediate Parent Entity of the Group is AIO V Finance (Ireland) DAC, incorporated in Ireland. The Ultimate Parent
Entity is Anchorage Capital Group LLC incorporated in the United States of America.
6.1.2. Guarantees for UK lease obligation
To effect the separation of the Group’s UK operations and subsidiaries from its Australian operations under the Senior
Lender Scheme (as detailed in Note 5 and Note 10), the Company and Slater & Gordon (UK) 1 Limited (“S&G UK”)
entered into certain transitional arrangements that are governed by a business separation agreement (“Business
Separation Agreement”).
Slater and Gordon Limited
66
Page 58
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Note 6: Other Notes
6.1. Related Party Disclosures
6.1.1. Equity Interests in Related Parties
The table below lists the primary operating controlled entities of the Group. Individual controlled entities that are dormant
have not been listed. All are owned 100% unless noted.
Country of Incorporation
2018
2017
% Equity Interest
% Equity Interest
2018
2017
100%
100%
100%
100%
Ltd
Schultz Toomey O’Brien Pty
100%
100%
100%
All States Legal Co Pty Ltd
100%
100%
100%
SG NSW Pty Ltd
100%
100%
Australia
Trilby Misso Lawyers Limited
Slater & Gordon Lawyers NSW
Conveyancing Works (Qld) Pty
Pty Limited
Limited
United Kingdom
SGL UK
Walker Smith Way Limited
WSW Limited
Slater & Gordon (UK) 1 Limited
4 Legal Limited
SGS
iSaaS Technology Limited
Compass Costs Consultants Ltd
Intelligent Claims Management
Limited
Mobile Doctors Group Limited
Medici Legal Limited
Mobile Doctors Solutions Limited
Mobile Doctors Limited
React & Recover Medical Group
Limited
Recover Healthcare Limited
React Medical Reporting Limited
Malta
Overland Limited
Overland Health Limited
Separation Agreement”).
Slater and Gordon Limited
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
4 Legal Solutions Limited
Slater & Gordon (UK) LLP
Adroit Financial Planning
Limited
React Medical Management
Medicalaw Limited
Abstract Legal Holdings
Limited
Limited
Limited
Accident Advice Helpline Direct
Legal Facilities & Management
Services Limited
Access to Compensation
Limited
Liberty Protect Limited
Slater Gordon Solutions Legal
Services Limited
SGS Business Process
Services (UK) Limited
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Overland Malta (Trading)
Limited
0%
100%
The Immediate Parent Entity of the Group is AIO V Finance (Ireland) DAC, incorporated in Ireland. The Ultimate Parent
Entity is Anchorage Capital Group LLC incorporated in the United States of America.
6.1.2. Guarantees for UK lease obligation
To effect the separation of the Group’s UK operations and subsidiaries from its Australian operations under the Senior
Lender Scheme (as detailed in Note 5 and Note 10), the Company and Slater & Gordon (UK) 1 Limited (“S&G UK”)
entered into certain transitional arrangements that are governed by a business separation agreement (“Business
6.1.2. Guarantees for UK lease obligation (continued)
The transitional arrangements involve the parties to the Business Separation Agreement seeking to procure that the
Company is released from parent guarantees and other forms of security and financial support that it has provided to the
UK operations. Any potential material contingent liability relates to parent guarantees for UK leases for the major office
premises used by the UK operations.
The Company has agreed that the timeframe which is reasonably practical for the UK operations to procure the release
of the parent guarantees will be a period of up to 18 months following the date of implementation of the Recapitalisation,
being 15 December 2017 (or such longer period as agreed between the Company and S&G UK).
If, during the transition period, the UK operations default on the UK leases subject to the parent guarantees, and those
parent guarantees have not yet been released, the Company may be liable for any unpaid amounts under those leases
at the time of default. Any contingent liability has the potential to be material in the event that the UK operations were in
default and the parent guarantees were called upon and the Company was unable to take steps that are typically
commercially available to mitigate its loss, such as sub-leasing. At 30 June 2018, the aggregate unpaid amounts under
these lease agreements for the remainder of the lease terms are $87,762,000.
It is not currently possible for the Company to estimate any liability or contingent liability under these guarantees as there
would need to be an event of default by the UK operations to cause any liability. In addition, numerous factors would
impact on the extent of any potential liability in that event, such as when the guarantee would be called and the amounts
outstanding at that time, the Company’s ability to take steps to mitigate loss, including subleasing the premises, and its
capacity to negotiate with the third parties who have the right to call on those guarantees. The UK operations also have a
number of operational and financial mechanisms in place which seek to prevent an event of default occurring. Liability in
respect of these guarantees will only arise if the UK operations default on their obligations under the leases and other
material contracts subject to a parent guarantee, prior to an agreement being made to release that guarantee.
6.1.3.
Deed of Cross Guarantee
All Australian entities are parties to a deed of cross guarantee under which each company guarantees the debts of the
others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a
financial report and directors’ report under Corporations Instrument 2016/785 dated 17 December 2016 issued by the
Australian Securities and Investments Commission.
6.1.4. Key Management Personnel Compensation
Compensation by category
Short-term employment benefits(1)
Post-employment benefits
Other long term employment benefits
Share based payments
Other benefits
2018
$
2017
$
2,325,760
108,655
67,887
-
419,954
2,924,235
177,750
43,502
879,381
949,550
2,922,256
4,974,418
(1) The amounts do not include fees attributable to Merrick Howes and Nil Stoesser as the Company does not pay them any fees or remuneration.
6.1.5. Transactions with AIO V Finance (Ireland) DAC (Immediate Parent Entity)
AIO V Finance (Ireland) DAC became the Immediate Parent Entity of the Group on implementation of the Senior Lender
Scheme, obtaining 53.36% of the Group’s ordinary shares. The following transactions are shown from 22 December
2017, the date from which AIO V Finance (Ireland) DAC was a related party.
Loans from Immediate Parent Entity
Debt balance on becoming related party
Additional drawdowns
Interest charged
Foreign exchange movement
Closing balance outstanding
2018
$
59,148,604
14,041,856
3,274,566
57,928
76,522,954
Page 58
Slater and Gordon Limited
Page 59
67
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
6.1.5. Transactions with AIO V Finance (Ireland) DAC (Immediate Parent Entity) (continued)
2018
$
Transactions with Immediate Parent Entity
Issue of new ordinary shares by SGL under the Senior Lender Scheme
118,071,528
In addition to the above, AIO V Finance (Ireland) DAC has holds $7,767,686 of warrants issued under the equity
component of the deferred restructure fee (see Note 5.6.4). This was recognised as a share based payment expense in
the period ended 30 June 2016.
The loan facilities are advanced by the Immediate Parent Entity as one of the members of the Senior Lender Scheme, on
the same terms as those agreed with the other lenders. The facilities are unsecured, and repayable in cash on maturity.
Further details of the terms of the facilities are provided in Note 5.2.2.
6.1.6. Transactions with Other Related Parties
The shareholdings of related parties and remuneration of KMP are disclosed in the Directors’ Report.
During the year, the Group has paid consulting fees to JACM Pty Ltd, of which James MacKenzie (Chair) is a Principal.
The consulting fees of $62,500 were paid to JACM Pty Ltd for consulting services prior to December 2017 and was
approved by the Board.
Outstanding receivables, if any, between related parties are included in Note 4.2. Outstanding payables, if any, are
included in Note 4.6.
6.2.
Parent Entity Disclosures
As at, and throughout, the financial year ended 30 June 2018 the parent entity of the Group was Slater and Gordon
Limited. Investments in subsidiary are accounted for at cost, less any impairment recognised since acquisition.
Results of parent entity
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Financial position for the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the Parent Company comprising of
Contributed equity
Reserves
Accumulated losses
Total Equity
2018
$’000
2017
$’000
(173,682)
597
(173,085)
(174,247)
619
(173,628)
130,526
256,349
80,116
271,577
127,393
283,756
197,382
335,789
1,348,528
12,885
(1,376,641)
1,119,180
31,745
(1,202,958)
(15,228)
(52,033)
Slater and Gordon Limited
68
Page 60
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
6.1.5. Transactions with AIO V Finance (Ireland) DAC (Immediate Parent Entity) (continued)
6.3.
Auditor’s Remuneration
The auditor of the Group for the year ended 30 June 2018 is Ernst & Young (30 June 2017: Ernst & Young).
Audit Services
Ernst & Young
Audit and review of financial reports
Other assurance services
Other regulatory services
Overseas Ernst & Young firms
Audit and review of financial reports
Other regulatory audit services
Other Services
Ernst & Young
Other – consulting services
2018
$
2017
$
710,000
90,000
59,500
767,000
-
100,450
947,019
-
1,689,076
42,017
1,806,519
2,598,543
-
19,923
1,806,519
2,618,466
Outstanding receivables, if any, between related parties are included in Note 4.2. Outstanding payables, if any, are
6.4.
Accounting Standards issued but not yet effective at 30 June 2018
2018
$’000
2017
$’000
(173,682)
(174,247)
597
619
(173,085)
(173,628)
130,526
256,349
80,116
271,577
127,393
283,756
197,382
335,789
1,348,528
1,119,180
12,885
31,745
(1,376,641)
(1,202,958)
(15,228)
(52,033)
At the date of authorisation of the financial statements, the Standards and Interpretations that were issued but not yet
effective, which have not been early adopted are listed below. A formal and detailed assessment of the expected impacts
of these standards and interpretations is currently underway with the initial findings for each new accounting standard
noted in the relevant sections below. The Group early adopted AASB 15 Revenue from Contracts with Customers during
year ended 30 June 2016.
Reference
AASB 9
Title
Financial Instruments
Standard Application date for Group
1 July 2018
1 January 2018
Application date of
AASB 9 as issued replaces most of AASB 139 Financial Instruments: Recognition and Measurement and includes a
logical model for classification, measurement and derecognition of financial assets and liabilities, a forward-looking
“expected loss” impairment model and a substantially reformed approach to hedge accounting. The main changes to the
classification and measurement of financial assets and liabilities are:
• Financial assets that are debt instruments will be classified based on (i) the objective of the entity's business model
for managing the financial assets, and (ii) the characteristics of the contractual cash flows.
• Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a
return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the
instrument.
• Financial assets can be designated and measured at fair value through profit or loss at initial recognition if doing so
eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring
assets or liabilities, or recognising the gains and losses on them, on different bases.
• Where the fair value option is used for financial liabilities, the change attributable to changes in credit risk is
presented in other comprehensive income, and the remaining change is presented in profit or loss.
An assessment of the impact of AASB 9 on the position of the Group is ongoing, however no expected material changes
in the classification of financial assets and liabilities have been identified to date. The impact of the introduction of the
expected loss impairment model for determining credit provisions has not yet been determined. There is no change
anticipated in relation to hedge accounting.
2018
$
Transactions with Immediate Parent Entity
Issue of new ordinary shares by SGL under the Senior Lender Scheme
118,071,528
In addition to the above, AIO V Finance (Ireland) DAC has holds $7,767,686 of warrants issued under the equity
component of the deferred restructure fee (see Note 5.6.4). This was recognised as a share based payment expense in
the period ended 30 June 2016.
The loan facilities are advanced by the Immediate Parent Entity as one of the members of the Senior Lender Scheme, on
the same terms as those agreed with the other lenders. The facilities are unsecured, and repayable in cash on maturity.
Further details of the terms of the facilities are provided in Note 5.2.2.
6.1.6. Transactions with Other Related Parties
The shareholdings of related parties and remuneration of KMP are disclosed in the Directors’ Report.
During the year, the Group has paid consulting fees to JACM Pty Ltd, of which James MacKenzie (Chair) is a Principal.
The consulting fees of $62,500 were paid to JACM Pty Ltd for consulting services prior to December 2017 and was
As at, and throughout, the financial year ended 30 June 2018 the parent entity of the Group was Slater and Gordon
Limited. Investments in subsidiary are accounted for at cost, less any impairment recognised since acquisition.
approved by the Board.
included in Note 4.6.
6.2.
Parent Entity Disclosures
Results of parent entity
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Financial position for the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Contributed equity
Reserves
Accumulated losses
Total Equity
Total equity of the Parent Company comprising of
Slater and Gordon Limited
Page 60
Slater and Gordon Limited
Page 61
69
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
6.4
Accounting Standards issued but not yet effective at 30 June 2018 (continued)
Reference
AASB Interpretation 23
Title
Uncertainty over Income Tax
Treatments
Application date of
Standard Application date for Group
1 January 2019
1 July 2019
The interpretation clarifies the application of the recognition and measurement criteria in AASB 12 Income Taxes when
there is uncertainty over income tax treatments. The interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately
• The assumptions an entity makes about the examination of tax treatment by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and circumstances
The Group has not yet assessed the impact of AASB Interpretation 23.
Reference
AASB 16
The key features of AASB 16 are as follows:
Lessee Accounting
Application date of
Title
Leases
Standard Application date for Group
1 July 2019
1 January 2019
•
Lessees are required to recognise assets and liabilities for all leases on balance sheet with a term of more than 12
months, unless the underlying asset is of low value.
• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in
optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an
option to terminate the lease.
•
Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation
expense on the right-of-use asset in profit or loss. This will replace operating lease expense under the current lease
standard AASB 117 Leases.
• AASB 16 contains disclosure requirements for lessees.
Lessor Accounting
• AASB 16 substantially carries forward the lessor accounting requirements in the current lease standard AASB 117
Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account
for those two types of leases differently.
• AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about
a lessor’s risk exposure, particularly to residual value risk.
As at the reporting date, the group has non-cancellable operating lease commitments of $42,267,000, see note 5.3.1. An
assessment of the impact of AASB 16 on the financial performance and position of the Group is ongoing with a view to
informing the transition decisions to be made before adoption of the new standard. It is not yet possible to make a
reliable estimate of the impact of the standard on the Consolidated Financial Statements. Although the impact is yet to be
quantified, given that at 30 June 2018 the Group is lessee to a number of operating leases, in particular in relation to
properties, it is expected that the adoption of the standard will result in a material impact to the assets and liabilities, but
the change to net assets in the statement of financial position is unlikely to be material. In addition, it is expected that the
adoption of the standard will change the recognition and measurement of lease expense in the statement of profit or loss.
Currently, the Group does not expect to early adopt AASB 16.
Slater and Gordon Limited
70
Page 62
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Note 7: Unrecognised Items
7.1. Guarantees
The Group has entered into lease rental guarantees and performance guarantees with a face value of $3,933,000 (30
June 2017: $12,134,000). Refer to Note 6 for details of the guarantees the Company has provided for the UK leases.
7.2. Other Commitments and Contingencies
The Group has an agreement with third party disbursement funder, Equal Access Funding Proprietary Limited (‘the
funder”), who funds disbursements in respect of individual matters and is reimbursed out of any settlement proceeds on
the matter. The Group has provided a financial guarantee to the funder for the repayment of clients’ obligations.
The total amount funded by the funder to the Group’s clients at 30 June 2018 is $6,587,000 (30 June 2017:
$16,027,000). The maximum exposure of the Group at 30 June 2018 is $6,587,000 (30 June 2017: $16,027,000) if the
disbursements on client matters are not recovered from any other party.
7.3.
Contingent Asset – Claims against Watchstone plc (Watchstone – formerly Quindell plc)
Watchstone Receivable
As part of the consideration provided for the implementation of the Senior Lender Scheme, the Company was provided
with a $40.0m receivable giving it recourse to the first $40m of the net proceeds that S&G UK receives from successful
settlement of the claims against Watchstone (formerly Quindell plc). Such claims were brought by S&G UK against
Watchstone arising from its acquisition of Watchstone’s Professional Services Division in May 2015. On 29 November
2016, the Group obtained a positive merits based opinion of its claims from an independent barrister, in accordance with
the provisions of the Share Purchase Agreement (“SPA”) between the Group and Watchstone. Having met this threshold
requirement, under the SPA provisions, the escrow amount of £50.0m will not be released until such time as the claim
made against Watchstone is resolved (through proceedings or settlement). The Group notified Watchstone of these
claims on 19 September 2016, and on 13 June 2017, S&G UK filed and served a claim in the English High Court against
Watchstone Group Plc for approximately £600.0m. Subsequent to this there have been no further significant
developments in the claim proceedings other than the exchange of further pleadings under the Court’s rules and the
commencement of the discovery process. The claim is based upon serious allegations against Watchstone and its then
senior management, including fraudulent misrepresentation, concerning the purchase by Slater and Gordon of
Watchstone’s Professional Services Division in 2015. Watchstone filed its defence on 12 October 2017. A trial date has
been set for October 2019.
6.4
Accounting Standards issued but not yet effective at 30 June 2018 (continued)
Reference
Title
Standard Application date for Group
AASB Interpretation 23
Treatments
1 January 2019
1 July 2019
Uncertainty over Income Tax
Application date of
The interpretation clarifies the application of the recognition and measurement criteria in AASB 12 Income Taxes when
there is uncertainty over income tax treatments. The interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately
• The assumptions an entity makes about the examination of tax treatment by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and circumstances
The Group has not yet assessed the impact of AASB Interpretation 23.
Application date of
Title
Leases
Standard Application date for Group
1 January 2019
1 July 2019
Reference
AASB 16
The key features of AASB 16 are as follows:
Lessee Accounting
•
•
Lessees are required to recognise assets and liabilities for all leases on balance sheet with a term of more than 12
months, unless the underlying asset is of low value.
• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in
optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an
option to terminate the lease.
Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation
expense on the right-of-use asset in profit or loss. This will replace operating lease expense under the current lease
standard AASB 117 Leases.
• AASB 16 contains disclosure requirements for lessees.
Lessor Accounting
• AASB 16 substantially carries forward the lessor accounting requirements in the current lease standard AASB 117
Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account
for those two types of leases differently.
• AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about
a lessor’s risk exposure, particularly to residual value risk.
As at the reporting date, the group has non-cancellable operating lease commitments of $42,267,000, see note 5.3.1. An
assessment of the impact of AASB 16 on the financial performance and position of the Group is ongoing with a view to
informing the transition decisions to be made before adoption of the new standard. It is not yet possible to make a
reliable estimate of the impact of the standard on the Consolidated Financial Statements. Although the impact is yet to be
quantified, given that at 30 June 2018 the Group is lessee to a number of operating leases, in particular in relation to
properties, it is expected that the adoption of the standard will result in a material impact to the assets and liabilities, but
the change to net assets in the statement of financial position is unlikely to be material. In addition, it is expected that the
adoption of the standard will change the recognition and measurement of lease expense in the statement of profit or loss.
Currently, the Group does not expect to early adopt AASB 16.
Slater and Gordon Limited
Page 62
Slater and Gordon Limited
Page 63
71
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
7.4.
Contingent Liabilities – Class Action Proceedings
On 12 October 2016 legal proceedings were filed against the Company in the Federal Court of Australia (“Federal
Court”) by Mr Matthew Hall on behalf of an open class of Slater and Gordon shareholders (the “Hall proceeding”). The
class action proceeding asserted that the Company engaged in misleading or deceptive conduct and breached its
continuous disclosure obligations during the period from 30 March 2015 to 24 February 2016 and sought compensation
or refund of investments, plus interest and costs. This class action proceeding was settled by agreement in July 2017
through a Federal Court mediation, subject to creditor, shareholder and Court approval of a shareholder claimant and
senior lender scheme of arrangement.
On 20 June 2017, the Company announced that legal proceedings were filed against it by Babscay Pty Ltd (the
“Babscay proceeding”) on behalf of persons who acquired an interest in shares of the Company between 24 August
2012 and 19 November 2015. The statement of claim asserted that the Company’s financial statements for the financial
years ended 30 June 2013, 2014 and 2015 contained false or misleading statements. This claim was later amended to
also include the Company’s financial statements for the financial year ended 30 June 2012. The allegations focus on the
way in which the Company recognised revenue and, in financial year 2015, accounted for acquisitions in accordance
with Australian Accounting Standards.
On 14 December 2017 the Federal Court approved a scheme of arrangement between the Company and all shareholder
claimants (“Shareholder Claimant Scheme”), including claimants in the Hall and Babscay proceedings. The Shareholder
Claimant Scheme resolves and compromises all potential shareholder claims against the Company and its officers. The
Shareholder Claimant Scheme became legally effective on 15 December 2017. Under the Scheme, shareholder
claimants have released the Company and officers from any shareholder claims and the Scheme can be pleaded as a
bar to any shareholder claim.
On 14 December 2017 the Federal Court also approved the settlement of the Hall proceeding and dismissed that
proceeding. The Company’s contribution to this settlement of $5.0m was recognised as a provision at 30 June 2017. The
Hall proceeding settlement is implemented by the Shareholder Claimant Scheme. The Babscay proceeding has not yet
been formally dismissed or discontinued, however the Shareholder Claimant Scheme releases the Company and officers
and bars the prosecution of that claim.
On 1 November 2017, class action legal proceedings were filed against the Company’s former auditors, Pitcher Partners,
by Babscay Pty Ltd (the “Babscay Pitcher proceeding”). On 16 November 2017, the Federal Court made orders allowing
Pitcher Partners to seek leave of the Court to make a third party claim against the Company and/or its directors, seeking
contribution or indemnity from those parties in relation to the Babscay Pitchers proceeding. On 15 December 2017, the
Federal Court granted leave to Pitcher Partners to file such a cross claim and on 23 February 2018, Pitcher Partners
served a cross claim on the Company and its former directors. Since being served with third party claim, the Company
has been in discussions with Pitcher Partners around the ongoing conduct of the claim. Under the Shareholder Claimant
Scheme, the Company and its former directors are indemnified by shareholder claimants from any claim made against
them by a third party which arises as a result of a claim made by a shareholder claimant against that third party.
Slater and Gordon Limited
72
Page 64
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
7.4.
Contingent Liabilities – Class Action Proceedings
On 12 October 2016 legal proceedings were filed against the Company in the Federal Court of Australia (“Federal
Court”) by Mr Matthew Hall on behalf of an open class of Slater and Gordon shareholders (the “Hall proceeding”). The
class action proceeding asserted that the Company engaged in misleading or deceptive conduct and breached its
continuous disclosure obligations during the period from 30 March 2015 to 24 February 2016 and sought compensation
or refund of investments, plus interest and costs. This class action proceeding was settled by agreement in July 2017
through a Federal Court mediation, subject to creditor, shareholder and Court approval of a shareholder claimant and
senior lender scheme of arrangement.
On 20 June 2017, the Company announced that legal proceedings were filed against it by Babscay Pty Ltd (the
“Babscay proceeding”) on behalf of persons who acquired an interest in shares of the Company between 24 August
2012 and 19 November 2015. The statement of claim asserted that the Company’s financial statements for the financial
years ended 30 June 2013, 2014 and 2015 contained false or misleading statements. This claim was later amended to
also include the Company’s financial statements for the financial year ended 30 June 2012. The allegations focus on the
way in which the Company recognised revenue and, in financial year 2015, accounted for acquisitions in accordance
with Australian Accounting Standards.
On 14 December 2017 the Federal Court approved a scheme of arrangement between the Company and all shareholder
claimants (“Shareholder Claimant Scheme”), including claimants in the Hall and Babscay proceedings. The Shareholder
Claimant Scheme resolves and compromises all potential shareholder claims against the Company and its officers. The
Shareholder Claimant Scheme became legally effective on 15 December 2017. Under the Scheme, shareholder
claimants have released the Company and officers from any shareholder claims and the Scheme can be pleaded as a
bar to any shareholder claim.
On 14 December 2017 the Federal Court also approved the settlement of the Hall proceeding and dismissed that
proceeding. The Company’s contribution to this settlement of $5.0m was recognised as a provision at 30 June 2017. The
Hall proceeding settlement is implemented by the Shareholder Claimant Scheme. The Babscay proceeding has not yet
been formally dismissed or discontinued, however the Shareholder Claimant Scheme releases the Company and officers
and bars the prosecution of that claim.
On 1 November 2017, class action legal proceedings were filed against the Company’s former auditors, Pitcher Partners,
by Babscay Pty Ltd (the “Babscay Pitcher proceeding”). On 16 November 2017, the Federal Court made orders allowing
Pitcher Partners to seek leave of the Court to make a third party claim against the Company and/or its directors, seeking
contribution or indemnity from those parties in relation to the Babscay Pitchers proceeding. On 15 December 2017, the
Federal Court granted leave to Pitcher Partners to file such a cross claim and on 23 February 2018, Pitcher Partners
served a cross claim on the Company and its former directors. Since being served with third party claim, the Company
has been in discussions with Pitcher Partners around the ongoing conduct of the claim. Under the Shareholder Claimant
Scheme, the Company and its former directors are indemnified by shareholder claimants from any claim made against
them by a third party which arises as a result of a claim made by a shareholder claimant against that third party.
Notes to the Financial Statements
For the Year Ended 30 June 2018
Note 8: Subsequent Events
The Directors are not aware of any significant events since the end of the reporting period.
Note 9: Business Combinations
9.1.
Accounting Policies
Business combinations are accounted for by applying the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, which is measured at acquisition-date fair value, and the amount of any
non-controlling interests in the acquiree. Deferred consideration payable is measured at present value. Any contingent
consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Contingent consideration
classified as a liability that is a financial instrument and within the scope of AASB 139 is measured at fair value with
changes in fair value recognised in the statement of profit or loss and other comprehensive income. For each business
combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or the
proportionate share of the acquiree identifiable net assets. Acquisition related costs are expensed as incurred.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts recognised at the acquisition date. If the reassessment still results
in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is
recognised in profit or loss as a gain from bargain purchase.
In conjunction with the business combination transaction there may be a transfer of assets between controlled entities as
part of restructuring the acquired business. The parent accounts for such transfers through reallocation of the cost of the
investments in its statement of financial position.
9.2.
Current Period Business Combinations
There were no business combinations during the year ended 30 June 2018.
9.3.
Prior Period Business Combinations
There were no business combinations during the year ended 30 June 2017.
Note 10: Discontinued operations
10.1. Summary of financial performance of discontinued operations
The summary of financial performance of the divestment or closure of the UK and Australian businesses are in the below
table.
Revenue
Other income
Expenses
(Loss) of discontinued operation before income tax expense
Net gain / (loss) from disposal before income tax expense
Income tax expense:
Income tax (expense) / benefit from discontinued operations
Income tax benefit on disposal of discontinued operations
Profit / (loss) from discontinued operations net of tax
Revenue
Other income
Expenses
Profit / (loss) from discontinued operation before income tax
expense
Income tax expense
Profit / (loss) from discontinued operations net of tax
UK
30 Jun 2018
$’000
157,691
Aus
30 Jun 2018
$’000
16,308
2,940
(208,369)
(47,738)
195,754
(1,092)
15,993
162,917
UK
30 Jun 2017
$’000
390,186
9,314
(855,925)
(456,425)
(17,028)
(473,453)
3
(29,632)
(13,321)
(8,163)
3,996
217
(17,271)
Aus
30 Jun 2017
$’000
29,800
51
(28,306)
1,545
(464)
1,081
Total
30 Jun 2018
$’000
173,999
2,943
(238,001)
(61,059)
187,591
2,904
16,210
145,646
Total
30 Jun 2017
$’000
419,986
9,365
(884,231)
(454,880)
(17,492)
(472,372)
Slater and Gordon Limited
Page 64
Slater and Gordon Limited
Page 65
73
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
10.2. Financial performance from discontinued operation – UK
Discontinued operations – UK
On 6 December 2017, the Company shareholders approved a Recapitalisation of the Group with the implementation of a
creditor’s Scheme of Arrangement (“the Senior Lender Scheme”). The Senior Lender Scheme was effective from 15
December 2017 and implemented on 22 December 2017. Consequently, this scheme resulted in:
a) Separation of all UK operations and UK subsidiaries from the Group effective from 15 December 2017
(including Slater and Gordon (UK) 1 Ltd), by way of transfer of these operations and entities to Slater and
Gordon UK Holdings Limited, an entity wholly owned by the Company’s majority Senior Lender.
b)
Issue of 66,050,874 shares in the Australian Parent Company to the Senior Lenders, representing 95% of the
Company’s total issued capital.
c) Reduction of outstanding secured debt facilities owed by the Group by a combination of restating and
refinancing the debt.
The UK subsidiaries and related operations represent a separate major geographical area of operations, and are
therefore presented as a discontinued operation in the current period. The comparative consolidated statement of profit
and loss and other comprehensive income has been restated to show the discontinued operation separately from
continuing operations.
Classification as discontinued operations – Critical accounting judgements
The transfer of the UK subsidiaries and related operations was conditional on the other transactions comprising the
Senior Lender Scheme, being the issue of equity to the Senior Lenders in the Australian Parent Company and reduction
of outstanding secured debt facilities. The transactions are economically linked and could not have occurred
independently as they achieve an overall economic outcome. Consequently, the impact of the transactions comprising
the Senior Lender Scheme has been presented in aggregate as part of the overall net gain on disposal of discontinued
operations.
The financial performance and cash flow information presented are for the period ended 15 December 2017 (being the
effective date from which the UK subsidiaries were deconsolidated) and the year ended 30 June 2017.
Revenue
Other income
Expenses
(Loss) of discontinued operation before income tax expense
Income Tax (expense) / benefit
(Loss) from discontinued operations net of tax
to 15 Dec 2017
$’000
157,691
2,940
(208,369)
(47,738)
(1,092)
(48,830)
30 Jun 2017
$’000
390,186
9,314
(855,925)
(456,425)
(17,028)
(473,453)
Slater and Gordon Limited
74
Page 66
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
10.2. Financial performance from discontinued operation – UK
10.3. Carrying value of net assets divested – UK
Discontinued operations – UK
The carrying amounts of assets and liabilities as at the date of transfer were:
Senior Lender Scheme, being the issue of equity to the Senior Lenders in the Australian Parent Company and reduction
Total non-current assets
Current assets
Cash and cash equivalents
Receivables
Work in progress
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Receivables
Work in progress
Intangible assets
Deferred tax assets
Total assets
Current liabilities
Payables
Short term borrowings
Current tax liabilities
Other current liabilities
Provisions
Total current liabilities(1)
Non-current liabilities
Long term borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
On 6 December 2017, the Company shareholders approved a Recapitalisation of the Group with the implementation of a
creditor’s Scheme of Arrangement (“the Senior Lender Scheme”). The Senior Lender Scheme was effective from 15
December 2017 and implemented on 22 December 2017. Consequently, this scheme resulted in:
a) Separation of all UK operations and UK subsidiaries from the Group effective from 15 December 2017
(including Slater and Gordon (UK) 1 Ltd), by way of transfer of these operations and entities to Slater and
Gordon UK Holdings Limited, an entity wholly owned by the Company’s majority Senior Lender.
b)
Issue of 66,050,874 shares in the Australian Parent Company to the Senior Lenders, representing 95% of the
c) Reduction of outstanding secured debt facilities owed by the Group by a combination of restating and
Company’s total issued capital.
refinancing the debt.
The UK subsidiaries and related operations represent a separate major geographical area of operations, and are
therefore presented as a discontinued operation in the current period. The comparative consolidated statement of profit
and loss and other comprehensive income has been restated to show the discontinued operation separately from
continuing operations.
Classification as discontinued operations – Critical accounting judgements
The transfer of the UK subsidiaries and related operations was conditional on the other transactions comprising the
of outstanding secured debt facilities. The transactions are economically linked and could not have occurred
independently as they achieve an overall economic outcome. Consequently, the impact of the transactions comprising
the Senior Lender Scheme has been presented in aggregate as part of the overall net gain on disposal of discontinued
The financial performance and cash flow information presented are for the period ended 15 December 2017 (being the
effective date from which the UK subsidiaries were deconsolidated) and the year ended 30 June 2017.
operations.
Revenue
Other income
Expenses
(Loss) of discontinued operation before income tax expense
Income Tax (expense) / benefit
(Loss) from discontinued operations net of tax
to 15 Dec 2017
30 Jun 2017
$’000
157,691
2,940
(208,369)
(47,738)
(1,092)
(48,830)
$’000
390,186
9,314
(855,925)
(456,425)
(17,028)
(473,453)
15 Dec 2017
$’000
18,439
303,128
183,159
16,152
520,878
15,980
66,531
86,968
12,185
8,443
190,107
710,985
347,253
9,013
6,315
34
11,585
374,200
-
12,623
12,623
386,823
324,162
(1) The carrying amount of liabilities is shown after the extinguishment of $674,219,000 of debt. This amount is included
within the gain from discontinued operations shown in Note 10.5.
10.4. Cash flows arising from disposal – UK
Consideration received, satisfied in cash
Cash and cash equivalents disposed of
Net cash outflows
15 Dec 2017
$’000
-
(18,439)
(18,439)
Slater and Gordon Limited
Page 66
Slater and Gordon Limited
Page 67
75
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
10.5. Gain from discontinued operations – UK
The gain arising on implementation of the Senior Lender Scheme including disposal of the UK operations is determined
as follows.
Carrying value of net assets disposed
Derecognition of non-controlling interests
Consideration received
Fair value of equity instruments issued by SGL (i)
Extinguishment of debt (ii)
Recycling of cash flow hedge reserve balance
Acceleration of UK share based payments expense to former owners (iii)
Transaction costs relating to scheme of arrangement(iv)
Reclassification of foreign currency translation reserve upon disposal
Income tax benefit
Net gain on implementation of the Senior Lender Scheme and disposal of
the UK operations
2018
$’000
(324,162)
(178)
40,000
(221,270)
693,864
(848)
(1,662)
(7,094)
17,104
15,993
211,747
(i)
Fair value of equity instruments issued
66,050,874 shares in the Australian Parent Company were issued to the Senior Lenders as part of the overall
consideration for the Senior Lender Scheme, and were therefore part of the consideration given to reduce the Group’s
outstanding debt in Australia and the UK immediately prior to deconsolidation.
The transaction is within the scope of the requirements of AASB Interpretation 19 Extinguishing Financial Liabilities with
Equity Instruments. Hence, the shares were recognised initially and measured at their fair value as at 22 December
2017, being the date the debt is restated. Fair value was determined with reference to the quoted share price of $3.35
per share on this date.
(ii)
Extinguishment of debt
The refinancing of the Super Senior Facility and Restated Syndicated Facility Agreement represents an extinguishment
of the original facilities. The new facilities were recognised at their fair values as at 22 December 2017, with the
difference recorded within profit or loss, and presented as part of the net gain on the implementation of the Senior Lender
Scheme and disposal of the UK operations.
(iii)
Acceleration of share based payments
The transfer resulted in the acceleration of Share Based Payments to former owners due to employees of the UK
subsidiaries. The associated cost has been recognised in profit or loss, and presented as a component of the net gain on
the implementation of the Senior Lender Scheme and disposal of the UK operations.
(iv)
Transaction costs relating to scheme of arrangement
Following the deconsolidation of the UK operations on 15 December 2017, additional transaction costs of $389,660 have
been incurred subsequent to this date for the scheme of arrangement. As a result, the total transaction costs relating to
scheme of arrangement at 30 June 2018 is $7,094,324.
Slater and Gordon Limited
76
Page 68
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
10.5. Gain from discontinued operations – UK
10.6. Financial performance from discontinued operation – Australia
The gain arising on implementation of the Senior Lender Scheme including disposal of the UK operations is determined
Discontinued operations – Australia
as follows.
Carrying value of net assets disposed
Derecognition of non-controlling interests
Consideration received
Fair value of equity instruments issued by SGL (i)
Extinguishment of debt (ii)
Recycling of cash flow hedge reserve balance
Acceleration of UK share based payments expense to former owners (iii)
Transaction costs relating to scheme of arrangement(iv)
Reclassification of foreign currency translation reserve upon disposal
Income tax benefit
the UK operations
Net gain on implementation of the Senior Lender Scheme and disposal of
2018
$’000
(324,162)
(178)
40,000
(221,270)
693,864
(848)
(1,662)
(7,094)
17,104
15,993
211,747
(i)
Fair value of equity instruments issued
66,050,874 shares in the Australian Parent Company were issued to the Senior Lenders as part of the overall
consideration for the Senior Lender Scheme, and were therefore part of the consideration given to reduce the Group’s
outstanding debt in Australia and the UK immediately prior to deconsolidation.
The transaction is within the scope of the requirements of AASB Interpretation 19 Extinguishing Financial Liabilities with
Equity Instruments. Hence, the shares were recognised initially and measured at their fair value as at 22 December
2017, being the date the debt is restated. Fair value was determined with reference to the quoted share price of $3.35
per share on this date.
(ii)
Extinguishment of debt
The refinancing of the Super Senior Facility and Restated Syndicated Facility Agreement represents an extinguishment
of the original facilities. The new facilities were recognised at their fair values as at 22 December 2017, with the
difference recorded within profit or loss, and presented as part of the net gain on the implementation of the Senior Lender
Scheme and disposal of the UK operations.
(iii)
Acceleration of share based payments
The transfer resulted in the acceleration of Share Based Payments to former owners due to employees of the UK
subsidiaries. The associated cost has been recognised in profit or loss, and presented as a component of the net gain on
the implementation of the Senior Lender Scheme and disposal of the UK operations.
(iv)
Transaction costs relating to scheme of arrangement
Following the deconsolidation of the UK operations on 15 December 2017, additional transaction costs of $389,660 have
been incurred subsequent to this date for the scheme of arrangement. As a result, the total transaction costs relating to
scheme of arrangement at 30 June 2018 is $7,094,324.
On 7 February 2018, the Company announced that it had undertaken an internal review and have broadened the review
of Personal Injury practices. Following the review, the Company determined it would:
•
•
•
•
Downsize the General Law business, by winding down or divesting the practice areas of Succession, Criminal,
and Family Law, to focus on Personal Injury, Class Actions and the Industrial/Union practice;
Retain a smaller commercial litigation practice;
Expand Union Services to maintain a criminal services offering and free wills to union clients;
Continue to focus on improving the firm’s service delivery.
The businesses that are subject to divestment or closure under this plan represent a separate major line of business, and
are therefore presented as discontinued operations.
The financial performance and cash flow information presented are for the periods ending on the various disposal dates
(April – June 2018) and the year ended 30 June 2018.
Revenue
Other income
Expenses
Profit / (loss) of discontinued operation before income tax expense
Income tax (expense) / benefit
Profit / (loss) from discontinued operations net of tax
10.7. Carrying value of net assets divested – Australia
The carrying amounts of assets and liabilities as at the date of transfer were:
30 Jun 2018
$’000
16,308
3
(29,632)
(13,321)
3,996
(9,325)
30 Jun 2017
$’000
29,800
51
(28,306)
1,545
(464)
1,081
Assets
Receivables
Work in progress
Property, plant and equipment
Total assets
Liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
30 Jun 2018
$’000
390
7,818
204
8,412
255
2,269
2,524
5,888
Slater and Gordon Limited
Page 68
Slater and Gordon Limited
Page 69
77
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
10.8. Assets held for sale – Australia
Two of the businesses being sold remained on hand at 30 June 2018. The assets and liabilities expected to be
transferred as part of the sales have been classified as held for sale at 30 June 2018.
The carrying amounts of assets and liabilities as at 30 June 2018 were:
Current assets
Work in progress
Property, plant and equipment
Total assets
Current liabilities
Deferred tax liabilities
Total liabilities
Net assets
30 June 2018
$’000
133
-
133
40
40
93
These assets are measured at the lower of their carrying value and their fair value less costs to sell. An impairment loss
of $358,000 was recognised as a result of writing down the assets in the disposal group down to their fair value less
costs to sell.
10.9. Cash flows arising from disposal – Australia
Consideration paid, satisfied in cash
Cash and cash equivalents disposed of
Net cash outflows
10.10. Loss from discontinued operations – Australia
The loss arising on disposal of the business is determined as follows.
Carrying value of net assets disposed
Consideration received
Transaction costs
Income tax (expense) / benefit
Net (loss) on disposal of the Australian businesses
30 Jun 2018
$’000
(228)
-
(228)
2018
$’000
(8,157)
1,908
(1,914)
217
(7,946)
78
Slater and Gordon Limited
Page 70
Slater & Gordon Limited Annual Report 2018
Notes to the Financial Statements
For the Year Ended 30 June 2018
Slater and Gordon Limited
Directors’ Declaration
(b).
(c).
The directors declare that the financial statements and notes set out on pages 32 to 78 and the directors’ report are
in accordance with the Corporations Act 2001 and:
(a).
Comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting
requirements;
As stated in Note 1, the financial statements also comply with International Financial Reporting Standards;
Give a true and fair view of the financial position of the consolidated entity as at 30 June 2018 and of its performance as
represented by the results of its operations, changes in equity and its cash flows,for the year ended on that date.
10.8. Assets held for sale – Australia
Two of the businesses being sold remained on hand at 30 June 2018. The assets and liabilities expected to be
transferred as part of the sales have been classified as held for sale at 30 June 2018.
The carrying amounts of assets and liabilities as at 30 June 2018 were:
Current assets
Work in progress
Property, plant and equipment
Total assets
Current liabilities
Deferred tax liabilities
Total liabilities
Net assets
30 June 2018
$’000
133
-
133
40
40
93
2018
$’000
(8,157)
1,908
(1,914)
217
(7,946)
In the directors’ opinion there are reasonable grounds to believe that:
• Slater and Gordon Limited will be able to pay its debts as and when they become due and payable.
•
the Company and the group entities identified in Note 6.1 will be able to meet any obligations or liabilities to which
they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group
entities pursuant to ASIC Corporations Instrument 2016/785.
This declaration has been made after receiving the declarations required to be made by the chief executive officer and
chief financial officer to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial year
ended 30 June 2018.
This declaration is made in accordance with a resolution of the directors.
These assets are measured at the lower of their carrying value and their fair value less costs to sell. An impairment loss
of $358,000 was recognised as a result of writing down the assets in the disposal group down to their fair value less
costs to sell.
10.9. Cash flows arising from disposal – Australia
30 Jun 2018
$’000
(228)
-
(228)
James MacKenzie
Chair
Melbourne
29 August 2018
Consideration paid, satisfied in cash
Cash and cash equivalents disposed of
Net cash outflows
10.10. Loss from discontinued operations – Australia
The loss arising on disposal of the business is determined as follows.
Carrying value of net assets disposed
Consideration received
Transaction costs
Income tax (expense) / benefit
Net (loss) on disposal of the Australian businesses
Slater and Gordon Limited
Page 70
Slater and Gordon Limited
79
Page 71
Slater & Gordon Limited Annual Report 2018
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of Slater and Gordon
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Slater and Gordon Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at
30 June 2018, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, notes to the financial statements, including a summary of significant accounting policies,
and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2018 and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context. We have determined the matters described below to
be the key audit matters to be communicated in our report.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
80
Page 72
Slater & Gordon Limited Annual Report 2018 Senior Lender Scheme Implementation and United Kingdom (UK) Discontinued Operations
Why significant
How our audit addressed the key audit matter
In December 2017, the shareholders of the
Company approved a recapitalisation of the
Group with the implementation of a creditors
Scheme of Arrangement (“the Senior Lender
Scheme”).
The disposal of former UK subsidiaries and
related operations was conditional on a
number of transactions comprising the Senior
Lender Scheme, the issue of equity in the
Australian parent company to the Senior
Lenders and the reduction of outstanding debt
facilities.
The transactions were determined to be
economically linked and could not have
occurred independently as they achieve an
overall economic outcome.
The Group’s disclosures regarding the Senior
Lender Scheme Implementation and UK
Discontinued Operations are included in Note
5.2.2 and Notes 10.1, 10.2 and 10.3 of the
financial report.
Given the estimates and judgements involved
in the timing of separation and the calculation
of the net gain on disposal, this transaction
was considered to be a Key Audit Matter.
Our procedures included the following:
►
►
►
►
►
►
Assessed the accounting treatment for this
transaction including the timing of recording
the associated net gain on disposal, the
presentation of the net gain on disposal as an
aggregate amount and the loss of control of
the UK subsidiaries.
Considered the requirement to record the
issue of equity to the Senior Lenders in the
Australian parent company at fair value, being
the Company’s share price of $3.35 on the
date of the scheme implementation in
accordance with Australian Accounting
Standards. An independent expert’s report in
relation to the Senior Lenders Scheme made
an assessment that the implied equity value
of the Group at the time of issuance was in
the range of $0.30 - $1.10 per share.
Assessed the quantitative and qualitative
factors used by management to support the
extinguishment of all existing UK borrowings
and the reduction of Australian debt facilities.
Assessed the determination of those
operations considered discontinued under
Australian Accounting Standards at 30 June
2018.
Assessed the key assumptions used as part of
management’s valuations of the Convertible
and Promissory Notes. We involved our
valuation specialists to assist in the work
where we considered such expertise was
required.
Considered the adequacy of the financial
report disclosures contained in Note 5.2.2
and Notes 10.1, 10.2 and 10.3 and the
presentation in aggregate as part of the
overall net gain on disposal of discontinued
operations.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 73
81
Slater & Gordon Limited Annual Report 2018 Going concern
Why significant
How our audit addressed the key audit matter
As disclosed in Note 1.1 to the financial report
the Directors concluded that in their opinion,
despite the Group continuing to generate
operating losses there are reasonable grounds
to believe that the Group has the ability to pay
its debts as and when they fall due. The
financial report has been prepared on a going
concern basis.
The going concern assumption is fundamental
to the basis of preparation of the financial
report. Given the judgment involved in the
preparation of cash flow forecasts to support
the going concern conclusion, this was
considered a Key Audit Matter.
Our procedures included the following:
►
►
►
►
►
Evaluated the assumptions made in the
budget and the cash flow forecasts approved
by the Board.
Assessed the consistency of the assumptions
included in the cash flow model with
statements related to future plans and
commitments contained in the directors
report.
Considered the historical accuracy of the
Group’s cash flow forecasting by reference to
actual results in prior periods compared to
Board approved budgets.
Considered the impact of a range of
sensitivities to the cash flow model to assess
the breakeven position, including reference to
financial covenants related to the Group’s
borrowing facilities.
Assessed the adequacy of the going concern
disclosures contained in Note 1.1.
Work in Progress and Associated Revenue Recognition
Why significant
How our audit addressed the key audit matter
Work in progress (WIP) is significant to the
Group, comprising 64.5% of total assets.
Movements in WIP are included in revenue
recognised for the year.
The Group’s disclosures regarding WIP and the
associated revenue recognised are included in
Notes 3.1 and Note 4.3 to the financial report.
The Directors’ determination of the carrying
value of WIP and its associated revenue
streams involves significant judgement, data
analysis and complexity.
The Group considers each revenue stream in
isolation and makes judgements in relation to:
►
►
The identification of a contract
The identification of the performance
obligations as part or within a contract
Our procedures included the following:
►
►
►
►
Considered whether the Groups’ accounting
policy for WIP complied with Australian
Accounting Standards, in particular AASB 15
Revenue.
Obtained details of WIP recognised for each
revenue stream at balance date and applied
sampling techniques to select individual legal
matters (“cases”) for testing.
Assessed that cases subject to divestment or
wind down due to the Group’s decision to exit
certain Australian law practices, were
excluded from the data models.
Obtained evidence to support the case status
that had been allocated to each case file by
the responsible professional. Evidence
obtained was assessed against the coding
guidelines of the Group.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
82
Page 74
Slater & Gordon Limited Annual Report 2018 Why significant
How our audit addressed the key audit matter
►
►
►
Determination of the transaction price,
particularly for revenue streams
accounted under a “no win no fee” basis
Allocation of the transaction price
Recognition of revenue when a
performance obligation is satisfied
To validate the judgements made in relation to
WIP, the Group develops a series of data
models based on historical information over a
two year period. Data included in these models
provides a methodological approach to
determine the valuation status.
Accordingly, this was considered a Key Audit
Matter.
►
►
►
►
►
Assessed the data that supports the
judgements that were included in the data
models.
Assessed the movements in the cases profile
including changes in status and ageing.
Involved our data quality specialists to assess
the accuracy and integrity of both the data
(historical information over a two year period)
and the workings of the models. This was
completed using data analytic procedures to
re-perform, re-calculate and check key
calculations.
Assessed the completeness of the portfolio
included in the data model.
Considered the adequacy of the financial
report disclosures contained in Notes 3.1 and
Note 4.3, in particular those regarding
assumptions to which the outcome of the data
models is most sensitive.
Recoverability of Trade Receivables and Disbursements and Associated Provisioning
Why significant
How our audit addressed the key audit matter
Trade receivables and disbursements are
significant to the Group, comprising 24.8% of
total assets, net of provisions for impairment.
The recoverability of trade receivables and
disbursements is a highly subjective area due
to the nature of the legal case profile and the
level of judgement applied by the Group in
determining provisions.
The timing of the recognition of trade
receivables is also subject to judgement as it is
related to the progress and expectation of
successful case outcomes.
Accordingly, this was considered a Key Audit
Matter.
Our procedures included the following:
►
Assessed the assumptions used to calculate
the trade receivables and disbursements
provisions for impairment.
► We assessed the timing of the recognition of
invoices in line with the expectation of
successful case outcomes. We obtained
evidence to support the case status for
ongoing matters and assessed against the
coding guidelines of the Group.
► We performed analyses of ageing of
receivables and disbursements, collection
history, future collections strategies and
assessment of significant overdue individual
trade receivables and disbursements.
►
Considered the adequacy of disclosures of
Note 4.2 to the financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 75
83
Slater & Gordon Limited Annual Report 2018 Litigation Matters and Subsequent Events
Why significant
How our audit addressed the key audit matter
The Group is and was subject to a number of
Shareholder Class Actions and other legal
proceedings. These matters are detailed in
Note 7.4 and Note 7.5.
In December 2017, the Federal Court
approved a scheme of arrangement between
the Group and shareholder claimants which
became legally effective. Under the scheme of
shareholder arrangements the claimants
released the company and its officers from
any shareholder claims.
Certain matters detailed in Note 7.4 and Note
7.3 remain ongoing.
Due to the subjective nature of accounting for
the scheme of arrangement, the ongoing
matters and the related disclosures, this was
considered a Key Audit Matter.
Our procedures included the following:
►
►
►
►
Obtained all settlement and claim
documentation in relation to the settled Class
Action and other legal proceedings.
For those matters ongoing, met with the
Group’s Internal General Counsel in relation to
the status of the legal proceedings and to
assess how these matters were accounted for
or disclosed.
Considered the conditions noted in Note 7.4
and Note 7.5 for factual accuracy.
Considered the adequacy of the financial
report disclosures contained in Note 7.4 and
Note 7.5.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2018 Annual Report other than the financial report and our
auditor’s report thereon. The Company’s 2018 Annual Report is expected to be made available to us
after the date of this auditor’s report. We obtained the Directors’ Report that is to be included in the
Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining
sections of the Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
84
Page 76
Slater & Gordon Limited Annual Report 2018 Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
► Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
► Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 77
85
Slater & Gordon Limited Annual Report 2018 ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 18 to 30 of the directors' report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Slater and Gordon Limited for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Christopher George
Partner
Melbourne
29 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
86
Page 78
Slater & Gordon Limited Annual Report 2018 Additional ASX Information
In accordance with the Australian Stock Exchange Limited Listing Rules, the Directors provide the following information as
at 31 August 2018.
(a). Distribution of shareholders and option holders.
Holding
1
1,001
5,001
10,001
- 1,000
- 5,000
- 10,000
- 100,000
100,001
- Over
Number of Ordinary Shareholders
13,000
418
64
34
10
13,526
There are 11,028 shareholders holding less than a marketable parcel of 161 shares each (i.e. less than $500 per
parcel of shares).
(b).
Twenty largest shareholders
Shareholder
AIO V FINANCE (IRELAND) DAC
TCA OPPORTUNITY INVESTMENTS SARL
YORK GLOBAL FINANCE BDH LLC
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
PERPETUAL CORPORATE TRUST LIMITED
BURLINGTON LOAN MANAGEMENT DAC
RIVER BIRCH MASTER FUND LP
DEUTSCHE BANK AG
VARDE INVESTMENT PARTNERS LP
PA VIEW OPPORTUNITY IV LIMITED
MR STUART JAMES MATTHEWS
MISS SHUHONG YANG
MR GREGORY WILLIAM SEDGMAN
MR KEN FOWLIE
MR PETER JOHN KLASEN
CHAWLA FAMILY PTY LTD
MR PENG REN
CITICORP NOMINEES PTY LIMITED
JBWERE (NZ) NOMINEES LIMITED <43941 A/C>
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Number of Shares held
37,100,244
6,190,736
5,802,877
4,324,093
3,591,500
3,156,207
2,872,374
1,346,814
1,167,332
460,611
76,796
64,652
55,941
50,963
50,601
50,000
50,000
43,588
42,976
40,876
% held
53.36
8.90
8.35
6.22
5.17
4.54
4.13
1.94
1.68
0.66
0.11
0.09
0.08
0.07
0.07
0.07
0.07
0.06
0.06
0.06
TOTAL: Top 20 holders of Fully Paid Ordinary Shares
66,539,181
95.70
(c).
Substantial Shareholders
A substantial shareholder is one who has a relevant interest in 5 per cent or more of the total issued shares in the
Company. Following are the substantial shareholders in the Company based on notifications provided to the
Company under the Corporations Act 2001:
Shareholder
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
AIO V FINANCE (IRELAND) DAC
TCA OPPORTUNITY INVESTMENTS SARL
YORK GLOBAL FINANCE BDH LLC
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
PERPETUAL CORPORATE TRUST LIMITED
BURLINGTON LOAN MANAGEMENT DAC
RIVER BIRCH MASTER FUND LP
DEUTSCHE BANK AG
VARDE INVESTMENT PARTNERS LP
PA VIEW OPPORTUNITY IV LIMITED
ARCM MASTERFUND 3 LTD
SLATER AND GORDON LTD
Number
60,050,874
60,050,874
60,050,874
60,051,057
60,050,874
60,050,874
60,050,874
60,050,874
60,050,874
60,050,874
60,050,874
60,050,874
Ordinary
Shares
% *
95
95
95
95
95
95
95
95
95
95
95
95
* Percentage of shares in which a relevant interest is held based on total issued capital of the Company at the time a substantial shareholder notice was provided to the Company.
87
Slater & Gordon Limited Annual Report 2018 (d).
Voting Rights
All issued ordinary shares carry one vote per
share. (e).
Corporate Governance Statement
The Company’s Corporate Governance Statement can be
at: https://www.slatergordon.com.au/the-firm/governance
found on
the Company’s website
A
88
Slater & Gordon Limited Annual Report 2018 Corporate Directory
Directors
James MacKenzie, Chair
Merrick Howes
Elana Rubin
Hayden Stephens
Nils Stoesser
Jacqui Walters
Company Secretary
Michael Neilson
Registered Office and
Corporate Office
Level 12
485 La Trobe Street
Melbourne Victoria 3000
Telephone: (03) 9602 6888
Facsimile: (03) 9600 0290
Company Website
www.slatergordon.com.au
Company Numbers
ACN 097 297 400
ABN 93 097 297 400
Share/Security Registers
The Registrar
Computershare Investor
Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
GPO Box 2975
Melbourne Victoria 3001
Telephone
Toll Free 1300 850 505
(Australia)
+61 3 9415 4000
(Overseas)
Investor Centre Website:
www.computershare.com.au
Email:
web.queries@computershare.com.au
Auditors
Ernst & Young
8 Exhibition Street
Melbourne Victoria 3000
Bankers
Westpac Banking
Corporation
Level 7
150 Collins Street
Melbourne Victoria 3000
Macquarie Bank
Level 23
101 Collins Street
Melbourne Victoria 3000
Solicitors
Minter Ellison
Level 23
525 Collins Street
Melbourne Victoria 3000
Securities Exchange Listing
Slater and Gordon Limited
shares are listed on the
Australian Securities
Exchange. The Home
Exchange is Melbourne.
ASX Code: SGH
Slater & Gordon Limited Annual Report 2018
89
S
l
a
t
e
r
&
G
o
r
d
o
n
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8